What should we make of the latest reports on rising home sales and the Federal Reserve's promise to keep interest rates low indefinitely?
Should we worry that at least some of the sales are being pushed forward by the expiring tax credits? Though that may be the case, take a minute and join the economists at the Fed to see the bigger picture. What's going on in the economy nationwide?
In its "open markets committee" statement issued last week, the Fed pointed to the underlying positives: Overall national "economic activity continues to strengthen," it said, and "the labor market is beginning to improve." Of course there are challenges to keeping the rebound rolling along, but the direction for the year as a whole is good.
The Fed's statement provides useful context for some of the encouraging numbers being racked up in the housing market. For example:
The Commerce Department reported last week that new home sales in March were up by 27 percent -- hitting their highest levels since July of 2009. Even the median sale price was up by 4.3 percent compared with the same month the year before.
Home resales in some major markets were up impressively as well, such as in Chicago, where sales jumped by 50 percent last month over the year before, and were 48 percent higher than they were in February. Florida sales were 37 percent higher in March than February and were up by 24 percent compared with the year before. Las Vegas saw its highest sales totals in four years.
Not surprisingly, applications for new mortgages to purchase homes have been rising strongly as well. The Mortgage Bankers Association reported a 12 percent surge in purchase applications for the latest week. No question the expiring tax credits requiring signed contracts by April 30 played a role in that number.
Meanwhile, the National Association of Business Economics, a group that represents corporate and government economists, just came out with an upbeat forecast as well. Three-quarters of the economists surveyed expect growth in the national gross domestic product (GDP) of two percent or higher through the balance of the year.
Twenty two percent of the private companies polled reported their payrolls and employee numbers increased in March, up significantly from the month before.
So the bottom line to keep in mind about the latest statistics and projections is this: The underlying economic factors, growth in jobs, growth in output, rising consumer expenditures and confidence, are the critical numbers to watch for future housing activity.
And at the moment, the consensus is that they look pretty promising
Risk wanes for real estate price declines - PMI sees improvements in nearly all markets
The risk of home-price declines decreased in 93 percent of the 384 markets tracked at the end of last year by analysts with PMI Mortgage Insurance Co., although half still showed an elevated or high risk of depreciation.
Overall risk of price declines "decreased dramatically" during the final three months of 2009, PMI said, largely because of improvements in affordability and declining foreclosure starts. Affordability was helped by falling home prices, lower mortgage rates, and increasing personal income.
"House prices have dropped sharply relative to incomes in most areas suggesting that prices have fully, or more than fully, adjusted for their unsustainable increases during the housing boom," PMI Chief Economist David Berson said in a statement accompanying the report.
PMI expects risk scores to continue falling, as unemployment rates should show improvement in the first quarter of 2010 and going forward, which should prove to be "an important new force in reducing the risk of lower prices."
Risky mortgage lending practices and loan products decreased sharply in 2009 "and are hardly present at all in 2010 lending," the report said.
Despite that, PMI's Risk Index -- which takes into account factors including unemployment, foreclosures and inventory levels -- still showed a 90 percent or greater chance of further price declines during the next two years in every market tracked in Florida and Nevada.
Most markets in the other "sand states" hit hard during the downturn, California and Arizona, were at high risk for price declines. All but three of 28 markets tracked in California showed improvement during the fourth quarter of 2009, however.
Seven of the 10 markets with the highest risk scores were in Florida: Naples, Cape Coral, Lakeland, Palm Coast, Miami, Port St. Lucie and Fort Lauderdale. Also making the top 10 riskiest markets list were Kingman, Ariz.; Riverside, Calif.; and Las Vegas.
Six of the 10 least risky markets were in North Dakota and Iowa: Grand Forks, Fargo and Bismark N.D.; and Iowa City, Ames and Cedar Rapids, Iowa. Also on the 10 least risky markets list were Killeen, Texas; Fayetteville N.C.; Morgantown, W.V.; and Texarkana, Ark.
Copyright 2010 Inman News
Overall risk of price declines "decreased dramatically" during the final three months of 2009, PMI said, largely because of improvements in affordability and declining foreclosure starts. Affordability was helped by falling home prices, lower mortgage rates, and increasing personal income.
"House prices have dropped sharply relative to incomes in most areas suggesting that prices have fully, or more than fully, adjusted for their unsustainable increases during the housing boom," PMI Chief Economist David Berson said in a statement accompanying the report.
PMI expects risk scores to continue falling, as unemployment rates should show improvement in the first quarter of 2010 and going forward, which should prove to be "an important new force in reducing the risk of lower prices."
Risky mortgage lending practices and loan products decreased sharply in 2009 "and are hardly present at all in 2010 lending," the report said.
Despite that, PMI's Risk Index -- which takes into account factors including unemployment, foreclosures and inventory levels -- still showed a 90 percent or greater chance of further price declines during the next two years in every market tracked in Florida and Nevada.
Most markets in the other "sand states" hit hard during the downturn, California and Arizona, were at high risk for price declines. All but three of 28 markets tracked in California showed improvement during the fourth quarter of 2009, however.
Seven of the 10 markets with the highest risk scores were in Florida: Naples, Cape Coral, Lakeland, Palm Coast, Miami, Port St. Lucie and Fort Lauderdale. Also making the top 10 riskiest markets list were Kingman, Ariz.; Riverside, Calif.; and Las Vegas.
Six of the 10 least risky markets were in North Dakota and Iowa: Grand Forks, Fargo and Bismark N.D.; and Iowa City, Ames and Cedar Rapids, Iowa. Also on the 10 least risky markets list were Killeen, Texas; Fayetteville N.C.; Morgantown, W.V.; and Texarkana, Ark.
Copyright 2010 Inman News
Slow Payments...How will this effect my Credit?
NEW YORK (CNNMoney.com) -- If you're delinquent on your mortgage, your credit score will suffer. Everyone knows that. The question is, by how much?
Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.
Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.
Here are the average hit your credit will take:
30 days late: 40 - 110 points
90 days late: 70 - 135 pointsForeclosure,
short sale or deed-in-lieu: 85 - 160
Bankruptcy: 130 - 240
Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.
Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.
Here are the average hit your credit will take:
30 days late: 40 - 110 points
90 days late: 70 - 135 pointsForeclosure,
short sale or deed-in-lieu: 85 - 160
Bankruptcy: 130 - 240
Service Members Get Extra Year for Tax Credit
Members of the U.S. military, foreign service and intelligence communities have another year to purchase a home and claim the home buyer tax credit.
Any service member who is or has been on extended duty for 90 days or more between Jan. 1, 2009 to April 30, 2010, has until April 30, 2011, to sign a sales contract and until June 30, 2011, to close on the property. Both the $8,000 first-time and the $6,500 repeat home buyer tax credits are included in the extension.
The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they receive government orders to move.
Source: The National Association of Home Builders (04/26/2010)
Any service member who is or has been on extended duty for 90 days or more between Jan. 1, 2009 to April 30, 2010, has until April 30, 2011, to sign a sales contract and until June 30, 2011, to close on the property. Both the $8,000 first-time and the $6,500 repeat home buyer tax credits are included in the extension.
The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they receive government orders to move.
Source: The National Association of Home Builders (04/26/2010)
Lead-Safe Remodeling
Effective April 22, 2010 remodeling work on homes built before 1978 must be performed only by contractors certified by the U.S. Environmental Protection Agency. Homeowners should assume lead paint is present and only hire certified contractors. Certified remodelers are required to display their EPA-certified certificate to home owners.
Contractors It is a misdemeanor for a person to engage in the business or act in the capacity of a contractor without having a license. This new law increases the penalties for acting as a contractor without a license.
This law makes a first conviction punishable by a fine not exceeding $5,000 or by imprisonment in a county jail for no more than 6 months, as specified, or both. The fine for a 2nd conviction is the greater of 20% of the contract price, 20% of the aggregate payments made to, or at the direction of, the unlicensed contractor, or $5,000. In addition, a 3rd or subsequent conviction is punishable by both a fine and imprisonment in a county jail, as specified, and requires that the fine be no less than $5,000 and no more than the greater of $10,000, 20% of the contract price, or 20% of the aggregate payments made to, or at the direction of, the unlicensed contractor.
A person who used the services of an unlicensed contractor is a victim of crime and eligible for restitution for economic losses, regardless of whether that person had knowledge that the contractor was unlicensed.
Amends Sections 7028 and 7028.16 of the CA Business and Professions Code.
Who must be licensed as a contractor? All businesses or individuals who construct or alter any building, highway, road, parking facility or other structure in CA must be licensed by the Contractor's State License Board if the total cost including labor and materials is $500 or more.
Contractors It is a misdemeanor for a person to engage in the business or act in the capacity of a contractor without having a license. This new law increases the penalties for acting as a contractor without a license.
This law makes a first conviction punishable by a fine not exceeding $5,000 or by imprisonment in a county jail for no more than 6 months, as specified, or both. The fine for a 2nd conviction is the greater of 20% of the contract price, 20% of the aggregate payments made to, or at the direction of, the unlicensed contractor, or $5,000. In addition, a 3rd or subsequent conviction is punishable by both a fine and imprisonment in a county jail, as specified, and requires that the fine be no less than $5,000 and no more than the greater of $10,000, 20% of the contract price, or 20% of the aggregate payments made to, or at the direction of, the unlicensed contractor.
A person who used the services of an unlicensed contractor is a victim of crime and eligible for restitution for economic losses, regardless of whether that person had knowledge that the contractor was unlicensed.
Amends Sections 7028 and 7028.16 of the CA Business and Professions Code.
Who must be licensed as a contractor? All businesses or individuals who construct or alter any building, highway, road, parking facility or other structure in CA must be licensed by the Contractor's State License Board if the total cost including labor and materials is $500 or more.
Housing Analyst says 'Worst Is Over'
Housing has slowed to the point where demand is again outstripping supply, says Metrostudy founder Mike Castleman.
Metrostudy, which researches the housing industry, says demand is forcing up prices in some markets, including Washington, D.C. and Indianapolis, but it remains stagnant in Houston, Naples, Fla., Charlotte, and Denver.
Overall, Metrostudy and Castleman believe the worst is over. "The good news is that builders will need to build a lot more houses than last year to keep up with demand. That will help the economy by creating jobs," Castleman says.
Source: Fortune, Shawn Tully (04/26/2010)
Metrostudy, which researches the housing industry, says demand is forcing up prices in some markets, including Washington, D.C. and Indianapolis, but it remains stagnant in Houston, Naples, Fla., Charlotte, and Denver.
Overall, Metrostudy and Castleman believe the worst is over. "The good news is that builders will need to build a lot more houses than last year to keep up with demand. That will help the economy by creating jobs," Castleman says.
Source: Fortune, Shawn Tully (04/26/2010)
Economy Forces Homeowners to Live Large Less Outdoors in 2010
Spring has sprung and while snow still lingers on lawns, patios and backyards, thoughts are turning to the great outdoors -- around the home.
However, those thoughts of leaving in-house hibernation behind are edged with economic concerns as homeowners take a less lavish look at how to move indoor living outside.
Buzzwords are "low" and "less" as low-maintenance landscaping, low-frill entertaining, even less technology are common in outside home improvement plans homeowners will undertake this year, according to the American Society of Landscape Architects (ASLA).
"Homeowners want to create a sense of place for their family, friends, and neighbors to enjoy outside, but an uncertain economy means many will dial back some of the extra features we've seen in past years," said Nancy Somerville, executive vice percent and CEO of ASLA.
From Jan. 25 to Feb. 12, when the ASLA surveyed 182 residential landscape architects about the popularity of various design elements for 2010 they found homeowners were avoiding more expensive, elaborate items in favor of more essential ones.
Given most outdoor living spaces are an extension of the kitchen, ASLA, not surprisingly, found the most popular kitchen features was an outdoor grill (94.4 percent) and counter space (73.5 percent).
More elaborate outdoor refrigerators (52.8 percent) and sinks (50 percent) were much less popular.
For entertainment purposes, instead of stereo systems (57.2 percent), wireless/Internet connectivity (44.1 percent), outdoor heaters (43.9 percent) and TVs (35.5 percent), there was much greater interest in more utilitarian seating/dining areas (95.6 percent), installed seating like benches and seat walls (90.6 percent) or weatherized outdoor furniture (77.1 percent). However, the fire pit/fireplace (94 percent) remained popular.
This year homeowners are also looking to go 'green' outside to save time and money on upkeep.
Popular landscaping elements include low-maintenance landscapes (94 percent); drip/water-efficient irrigation (85.2 percent); native/adapted drought tolerant plants (85.2 percent); and less sprawling lawn (73.9 percent).
Other popular features include fountains/water features (87.8 percent) and, taking a cue from the First Lady, Michelle Obama, food/vegetable gardens (78.5 percent).
Among the more expensive outdoor architectural features that remain popular were spas (hot tub, Jacuzzi, whirlpool, indoor/outdoor sauna; 79.1 percent); decks (83 percent), porches (76.4 percent) and swimming pools (72.4 percent).
Among the least popular items were sleeping spaces (5.6 percent); geothermal-heated pools (28.2 percent); outdoor cooling systems (36.5 percent); outdoor heaters (43.8 percent); solar-powered lights (49.4 percent); and sports/recreational spaces (tennis courts, bocce ball, etc.; 47 percent).
Published: April 22, 2010
However, those thoughts of leaving in-house hibernation behind are edged with economic concerns as homeowners take a less lavish look at how to move indoor living outside.
Buzzwords are "low" and "less" as low-maintenance landscaping, low-frill entertaining, even less technology are common in outside home improvement plans homeowners will undertake this year, according to the American Society of Landscape Architects (ASLA).
"Homeowners want to create a sense of place for their family, friends, and neighbors to enjoy outside, but an uncertain economy means many will dial back some of the extra features we've seen in past years," said Nancy Somerville, executive vice percent and CEO of ASLA.
From Jan. 25 to Feb. 12, when the ASLA surveyed 182 residential landscape architects about the popularity of various design elements for 2010 they found homeowners were avoiding more expensive, elaborate items in favor of more essential ones.
Given most outdoor living spaces are an extension of the kitchen, ASLA, not surprisingly, found the most popular kitchen features was an outdoor grill (94.4 percent) and counter space (73.5 percent).
More elaborate outdoor refrigerators (52.8 percent) and sinks (50 percent) were much less popular.
For entertainment purposes, instead of stereo systems (57.2 percent), wireless/Internet connectivity (44.1 percent), outdoor heaters (43.9 percent) and TVs (35.5 percent), there was much greater interest in more utilitarian seating/dining areas (95.6 percent), installed seating like benches and seat walls (90.6 percent) or weatherized outdoor furniture (77.1 percent). However, the fire pit/fireplace (94 percent) remained popular.
This year homeowners are also looking to go 'green' outside to save time and money on upkeep.
Popular landscaping elements include low-maintenance landscapes (94 percent); drip/water-efficient irrigation (85.2 percent); native/adapted drought tolerant plants (85.2 percent); and less sprawling lawn (73.9 percent).
Other popular features include fountains/water features (87.8 percent) and, taking a cue from the First Lady, Michelle Obama, food/vegetable gardens (78.5 percent).
Among the more expensive outdoor architectural features that remain popular were spas (hot tub, Jacuzzi, whirlpool, indoor/outdoor sauna; 79.1 percent); decks (83 percent), porches (76.4 percent) and swimming pools (72.4 percent).
Among the least popular items were sleeping spaces (5.6 percent); geothermal-heated pools (28.2 percent); outdoor cooling systems (36.5 percent); outdoor heaters (43.8 percent); solar-powered lights (49.4 percent); and sports/recreational spaces (tennis courts, bocce ball, etc.; 47 percent).
Published: April 22, 2010
CA Governor Signs New $10,000 Home Buyer's Credit Bill
California homeowners might be seeing another $10,000 tax credit offer soon. Despite the economic woes of the state, the governor has signed a bill offering this tax credit to home buyers.
Is this sound business judgment? California has a $20.7 billion deficit in the general fund budget over the next 16 months and owes $8.8 billion in short-term loans that have to be paid off by June. There is an additional $120-plus billion in outstanding bonds and interest that will be paid over decades. The state’s pension fund, CalPers, has $16.3 billion more in liabilities than assets plus California also faces a $51.8 billion for the health and dental benefits of state retirees and future retirees.
The bottom line for California, is that it has the lowest credit rating of any state in the nation, just above junk bond status. One major problem is the rise in California’s debt-service ratio (DSR). That is, the ratio of annual general fund debt–service costs to annual general fund revenues and transfers.
This is often used as one indicator of the state’s debt burden. The higher it is and more rapidly it rises, the more closely bond raters, financial analysts, and investors tend to look at the state’s debt practices, and the more debt–service expenses limit the use of revenues for other programs. Debt servicing is projected to comprise 9% of general fund revenues by the end of 2014-15. According to Bloomberg News, the market believes a developing country like Kazakhstan, with about 15.7 million people, is less likely to default on its debt than California, which is the eighth largest economy in the world.
Despite the economic woes of the state, the new (some say extension of the 2009 new home credit) bill, AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes.
The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and closes the sale before Aug. 1, 2011, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Purchasers will be required to live in the home for at least two years or forfeit -repay the credit. (Before acting on this preliminary information for the tax credit, one should first consult your legal/tax professional.)
Published: April 19, 2010
Number of Delinquent Mortgages Declines
The number of delinquent mortgages declined 8.6 percent in March, says LPS Applied Analytics, which tracks the performance of loans for investors. Totals also declined in February.
The biggest decline was in loans more than 30 days past due, which are now at about the same level as they were in spring 2008.
"We're not out of the woods, but this appears to be a turning point," says LPS Applied Analytics President Ted Jadlos. "This is the first time we've seen improvement across all stages of mortgage delinquency."
Source: The Wall Street Journal, Ruth Simon (04/19/2010)
The biggest decline was in loans more than 30 days past due, which are now at about the same level as they were in spring 2008.
"We're not out of the woods, but this appears to be a turning point," says LPS Applied Analytics President Ted Jadlos. "This is the first time we've seen improvement across all stages of mortgage delinquency."
Source: The Wall Street Journal, Ruth Simon (04/19/2010)
Number of Delinquent Mortgages Declines
The number of delinquent mortgages declined 8.6 percent in March, says LPS Applied Analytics, which tracks the performance of loans for investors. Totals also declined in February.
The biggest decline was in loans more than 30 days past due, which are now at about the same level as they were in spring 2008.
"We're not out of the woods, but this appears to be a turning point," says LPS Applied Analytics President Ted Jadlos. "This is the first time we've seen improvement across all stages of mortgage delinquency."
Source: The Wall Street Journal, Ruth Simon (04/19/2010)
The biggest decline was in loans more than 30 days past due, which are now at about the same level as they were in spring 2008.
"We're not out of the woods, but this appears to be a turning point," says LPS Applied Analytics President Ted Jadlos. "This is the first time we've seen improvement across all stages of mortgage delinquency."
Source: The Wall Street Journal, Ruth Simon (04/19/2010)
Lenders Unload Mortgages to Collection Agencies
Lenders are selling second mortgages and home-equity lines in default to collection agencies that have the right to collect this money potentially for decades.
"It's a big business, and investors are coming out of the woodwork," says Sylvia Alayon, a vice president for Consumer Mortgage Audit Center, which analyzes mortgage documents for lenders, advocacy groups, and attorneys.
Real estate professionals will be doing their short-sale clients a big favor if they urge them to get professional advice before they sign agreements, Alayon says.
A new government short-sale program, which takes effect Monday, aims to prevent banks from reselling this debt. Sellers covered under the program will receive notice that secondary lien holders have received part of the proceeds of the sale "in exchange for release and full satisfaction of their liens."
Source McClatchy/Tribune News, Jim Wasserman (04/19/2010)
"It's a big business, and investors are coming out of the woodwork," says Sylvia Alayon, a vice president for Consumer Mortgage Audit Center, which analyzes mortgage documents for lenders, advocacy groups, and attorneys.
Real estate professionals will be doing their short-sale clients a big favor if they urge them to get professional advice before they sign agreements, Alayon says.
A new government short-sale program, which takes effect Monday, aims to prevent banks from reselling this debt. Sellers covered under the program will receive notice that secondary lien holders have received part of the proceeds of the sale "in exchange for release and full satisfaction of their liens."
Source McClatchy/Tribune News, Jim Wasserman (04/19/2010)
No Need to Hit the Panic Button Yet – Added Jobs Push Mortgage Rates Up
For those worried the end of government mortgage-backed securities purchasing could spell a dramatic increase in home loan rates, there's no need to hit the panic button just yet. A slight rise (+0.125) in long term interest rates Friday was more the product of a Labor Department report showing that the US added 162,000 jobs in March, the biggest monthly gain in three years, than it was a direct effect of the March 31st Fed MBS exit.
Mortgage-backed securities prices, which drive mortgage rates in the opposite direction, have dropped twice in the past 10 days each time pushing conforming 30-yr fixed rates up 1/8, once before and once after March 31st.
Reports depicting the up-tic in rates as the end of an era of low fixed mortgage rates are unfounded. While in a doomsday scenario it's speculated the Fed exit from MBS buying could leave a void in MBS markets big enough that demand and prices plummet causing long term fixed rates to skyrocket, fed officials suggest private buyers are ready to step in and take their place.
According to FreeRateUpdate.com conventional 30-yr fixed mortgages are available today at 5 percent to well qualified consumers paying a standard .07 to 1 point origination. 15-yr fixed mortgages are now available at 4.375 percent, up from 4.25. Today's 5/1 ARM rates are at 3.75 percent, up from 3.625. Despite the sub 4 percent 5/1 ARM rate, data shows borrowers are choosing fixed loans over adjustable loans at a record ratio and have been for several months (96 percent of new mortgages are fixed - Freddie Mac).
FHA 30-yr fixed mortgages are available at 4.875 percent today, an 1/8 lower than conventional loans. Securing FHA financing means a higher APR, despite the note rate and origination being the same, MI and other FHA fees charged on FHA loans drive up the cost. Increasing those costs yesterday was a boost to MI from 1.75 to 2.25 percent of the loan amount. The increase (+0.50) in the premium (MI) charged to borrowers at closing is part of an effort to help the Federal Housing Administration guard against losses from record high loan default rates.
Jumbo mortgages remain available at a 30-yr fixed rate of 5.625, the same as last week.
The benchmark 10-yr treasury yield, a leading indicator for fixed mortgage rates, is near a 1 year high.
Rates mentioned in this article are available to well-qualified consumers paying a standard .07 to 1 point origination as verified by FreeRateUpdate.com research of over two dozen wholesale lenders' rate sheets. Conventional: Conforming Freddie Mac and Fannie Mae insured mortgages. FHA loans are backed by the Federal Housing Administration.
Today's Mortgage Rates:
30 yr fixed rate - 5.000%
15 yr fixed rate - 4.375%
5/1 ARM rate - 3.750%
FHA 30 yr fixed rate - 4.875%
FHA 15 yr fixed rate - 4.500%
FHA 5/1 ARM rate - 3.750%
VA 30 yr fixed rate - 5.000%
Jumbo 30 yr fixed rate - 5.625%
Jumbo Conforming 30 yr fixed rate - 5.250%
Mortgage-backed securities prices, which drive mortgage rates in the opposite direction, have dropped twice in the past 10 days each time pushing conforming 30-yr fixed rates up 1/8, once before and once after March 31st.
Reports depicting the up-tic in rates as the end of an era of low fixed mortgage rates are unfounded. While in a doomsday scenario it's speculated the Fed exit from MBS buying could leave a void in MBS markets big enough that demand and prices plummet causing long term fixed rates to skyrocket, fed officials suggest private buyers are ready to step in and take their place.
According to FreeRateUpdate.com conventional 30-yr fixed mortgages are available today at 5 percent to well qualified consumers paying a standard .07 to 1 point origination. 15-yr fixed mortgages are now available at 4.375 percent, up from 4.25. Today's 5/1 ARM rates are at 3.75 percent, up from 3.625. Despite the sub 4 percent 5/1 ARM rate, data shows borrowers are choosing fixed loans over adjustable loans at a record ratio and have been for several months (96 percent of new mortgages are fixed - Freddie Mac).
FHA 30-yr fixed mortgages are available at 4.875 percent today, an 1/8 lower than conventional loans. Securing FHA financing means a higher APR, despite the note rate and origination being the same, MI and other FHA fees charged on FHA loans drive up the cost. Increasing those costs yesterday was a boost to MI from 1.75 to 2.25 percent of the loan amount. The increase (+0.50) in the premium (MI) charged to borrowers at closing is part of an effort to help the Federal Housing Administration guard against losses from record high loan default rates.
Jumbo mortgages remain available at a 30-yr fixed rate of 5.625, the same as last week.
The benchmark 10-yr treasury yield, a leading indicator for fixed mortgage rates, is near a 1 year high.
Rates mentioned in this article are available to well-qualified consumers paying a standard .07 to 1 point origination as verified by FreeRateUpdate.com research of over two dozen wholesale lenders' rate sheets. Conventional: Conforming Freddie Mac and Fannie Mae insured mortgages. FHA loans are backed by the Federal Housing Administration.
Today's Mortgage Rates:
30 yr fixed rate - 5.000%
15 yr fixed rate - 4.375%
5/1 ARM rate - 3.750%
FHA 30 yr fixed rate - 4.875%
FHA 15 yr fixed rate - 4.500%
FHA 5/1 ARM rate - 3.750%
VA 30 yr fixed rate - 5.000%
Jumbo 30 yr fixed rate - 5.625%
Jumbo Conforming 30 yr fixed rate - 5.250%
Health Care Reform: What's the Impact on You?
Now that health insurance reform is signed into law, what is the impact on real estate brokers and sales associates?
First, if you are an individual who buys your own coverage and have a policy you like, your coverage would be “grandfathered” and would be considered “qualified coverage.” If you are an employer who already offers health insurance to your salaried workers, you may continue to offer the plan you have. Your existing plan is “grandfathered” and you are deemed in compliance with the new employer mandate. You may continue to enroll new employees and terminate those employees who leave the firm without jeopardizing this grandfathered status.
Second, the law creates a uniform, national set of insurance ratings and underwriting standards. These new rules spell out the criteria that insurers can use when evaluating an application. The goal of the new standards is to create a set of rules that more closely resemble what most folks think of as the rules that apply to a group policy.
Insurers can charge different premiums based on policy holders' factors such as age, the type of policy purchased, and geographic area. Insurers can't, however, deny coverage or base premiums on an applicant's preexisting condition, claims history or gender. This is a significant change from the current rules in the great majority of states.
Second, the law will seek to expand the individual and small-business insurance markets, which are the markets through which real estate brokers and sales associates principally shop for coverage.
The goal is to increase access to affordable coverage by increasing competition among insurers, in part by expanding the pools of insureds (with a new requirement for all individuals to have coverage), encouraging insurers to enter new markets, and by allowing markets to cross state lines, among other things. The eventual goal is to merge the individual and small group markets into one larger market. In either case, independent contractors will be able to shop for coverage in both the individual and the small-business markets, so their options will be increased.
Third, the law creates the insurance exchanges that received so much attention in the media. The exchanges are in effect the new insurance marketplaces through which individuals and small employers will shop for coverage. Because insurance ratings and underwriting standards are made more uniform under the law, shopping for coverage through the exchange’s online services or through an insurance broker is simplified, at least in theory, because comparison between plans is made easier.
Fourth, the law requires individuals to buy health insurance and gives incentives businesses to make health insurance available to their employees. That means practitioners will have to buy coverage if they don't already have it or face a penalty unless they can show they can't get coverage for less than a certain percentage of their income--10 percent--or or would otherwise face a financial hardship. If they can't get an exemption for one of these reasons, they pay a fine.
The employer mandate covers businesses with more than 50 employees. Most real estate brokerages, as small businesses with fewer than 50 employees (the sales associates, as independent contractors, don't count against the employee total), are expected to be exempted from the mandate. Large employers subject to the mandate that fail to comply face a penalty. Affordability credits, to help offset costs, are available to both individuals and very small employers, including very small nonprofit associations that are employers.
First, if you are an individual who buys your own coverage and have a policy you like, your coverage would be “grandfathered” and would be considered “qualified coverage.” If you are an employer who already offers health insurance to your salaried workers, you may continue to offer the plan you have. Your existing plan is “grandfathered” and you are deemed in compliance with the new employer mandate. You may continue to enroll new employees and terminate those employees who leave the firm without jeopardizing this grandfathered status.
Second, the law creates a uniform, national set of insurance ratings and underwriting standards. These new rules spell out the criteria that insurers can use when evaluating an application. The goal of the new standards is to create a set of rules that more closely resemble what most folks think of as the rules that apply to a group policy.
Insurers can charge different premiums based on policy holders' factors such as age, the type of policy purchased, and geographic area. Insurers can't, however, deny coverage or base premiums on an applicant's preexisting condition, claims history or gender. This is a significant change from the current rules in the great majority of states.
Second, the law will seek to expand the individual and small-business insurance markets, which are the markets through which real estate brokers and sales associates principally shop for coverage.
The goal is to increase access to affordable coverage by increasing competition among insurers, in part by expanding the pools of insureds (with a new requirement for all individuals to have coverage), encouraging insurers to enter new markets, and by allowing markets to cross state lines, among other things. The eventual goal is to merge the individual and small group markets into one larger market. In either case, independent contractors will be able to shop for coverage in both the individual and the small-business markets, so their options will be increased.
Third, the law creates the insurance exchanges that received so much attention in the media. The exchanges are in effect the new insurance marketplaces through which individuals and small employers will shop for coverage. Because insurance ratings and underwriting standards are made more uniform under the law, shopping for coverage through the exchange’s online services or through an insurance broker is simplified, at least in theory, because comparison between plans is made easier.
Fourth, the law requires individuals to buy health insurance and gives incentives businesses to make health insurance available to their employees. That means practitioners will have to buy coverage if they don't already have it or face a penalty unless they can show they can't get coverage for less than a certain percentage of their income--10 percent--or or would otherwise face a financial hardship. If they can't get an exemption for one of these reasons, they pay a fine.
The employer mandate covers businesses with more than 50 employees. Most real estate brokerages, as small businesses with fewer than 50 employees (the sales associates, as independent contractors, don't count against the employee total), are expected to be exempted from the mandate. Large employers subject to the mandate that fail to comply face a penalty. Affordability credits, to help offset costs, are available to both individuals and very small employers, including very small nonprofit associations that are employers.
State and Federal Tax Credits Info.
For the federal incentive, contracts must be inked by April 30, while closings have to happen by June 30. The California credit covers closings on existing or new homes on or after May 1, leaving a short window for double dipping. Buyers will now be eligible for both the federal and state credit and will likely consume a significant piece of the state credit given the first-come, first-serve allocation.
Time Line possibilities:The tax credit will benefit about 14,000 new-home buyers, lasting as long as five months.
The State allotment could be snapped up in about a month. (10,000 homes)
Time Line possibilities:The tax credit will benefit about 14,000 new-home buyers, lasting as long as five months.
The State allotment could be snapped up in about a month. (10,000 homes)
Mortgage Forgiveness Debt Relief Act of 2007
IRS tells homeowners how to get tax relief if a lender forgives part of their debtGenerally, the Internal Revenue Service (IRS) treats debt forgiveness by a creditor as taxable income. However, under federal legislation that took effect in 2007, certain home mortgage debt cancellations—such as loan modifications, short sales, or foreclosures—may be exempted from federal taxes. Other exemptions are also available.
Homeowners considering a loan modification, short sale, or foreclosure should note that the federal tax exclusion under the Mortgage Forgiveness Debt Relief Act of 2007 only applies to mortgage balances on a qualified principal residence and not on second homes, rental real estate, or business properties.
The maximum amount of forgiven debt eligible under the 2007 law is $2 million for married taxpayers filing jointly and $1 million for single taxpayers.
The debt reduction only can be for loan amounts used to buy, build, or substantially improve a principal residence, including refinance loans as long as an increase in the total mortgage debt if any is attributable to renovations and capital improvements of the house. However, if refinance proceeds were used for other personal purposes, such as paying off credit card bills, purchasing cars, or investing in stocks, then the mortgage debt attributable to those expenditures is not eligible for tax exclusion under the 2007 law.
California homeowners who sold their house in a short sale or were foreclosed upon in 2009 still may have to pay state taxes on forgiven mortgage debt. The California legislature did not extend the tax exemption for mortgage debt forgiveness for state taxes. However, lawmakers are working on a bill that would provide the same tax relief on state taxes as the federal government currently offers.
Homeowners considering a loan modification, short sale, or foreclosure should note that the federal tax exclusion under the Mortgage Forgiveness Debt Relief Act of 2007 only applies to mortgage balances on a qualified principal residence and not on second homes, rental real estate, or business properties.
The maximum amount of forgiven debt eligible under the 2007 law is $2 million for married taxpayers filing jointly and $1 million for single taxpayers.
The debt reduction only can be for loan amounts used to buy, build, or substantially improve a principal residence, including refinance loans as long as an increase in the total mortgage debt if any is attributable to renovations and capital improvements of the house. However, if refinance proceeds were used for other personal purposes, such as paying off credit card bills, purchasing cars, or investing in stocks, then the mortgage debt attributable to those expenditures is not eligible for tax exclusion under the 2007 law.
California homeowners who sold their house in a short sale or were foreclosed upon in 2009 still may have to pay state taxes on forgiven mortgage debt. The California legislature did not extend the tax exemption for mortgage debt forgiveness for state taxes. However, lawmakers are working on a bill that would provide the same tax relief on state taxes as the federal government currently offers.
Greenspan: Housing Will Come Back
Former Federal Reserve Chair Alan Greenspan told officials in Mexico on Wednesday that he believes U.S. home prices have hit bottom. However, home owners are still unnerved by the decline in value, and until prices stabilize, the economy will remain weak.
"We will not be out of this crisis until home prices truly stabilize in the United States. They appear to have stabilized, but they are very fragile," Greenspan said in a televised interview.
"Eventually housing will come back; it can't get any lower," he added.
Source: Reuters News (03/25/2010)
"We will not be out of this crisis until home prices truly stabilize in the United States. They appear to have stabilized, but they are very fragile," Greenspan said in a televised interview.
"Eventually housing will come back; it can't get any lower," he added.
Source: Reuters News (03/25/2010)
Browsing For Housing Requires On-line, Off-line Smarts
Nearly nine out of 10 home buyers can't be wrong -- browsing for housing online puts listings at their fingertips, speeds the home-buying process, and comes with an educational bonus.
"More informed buyers, improve the transaction process," says Douglas de Jager, co-founder of DotHomes.com one of the newer online listing services on the block.
The California Association of Realtors (CAR) reports that 84 percent of home buyers use the internet as a significant part of the home buying process, according to its 2009 Survey of California Homebuyers.
"There is so much more information made available to us online, when you go to the actual home, it's just a validation process for what you've seen online," de Jager adds.
But transforming digital digs into a real home of your dreams isn't just about bandwidth and educational content.
Using the Internet to buy a home comes with the same prerequisite necessary for any buyer -- get financing locked down first.
Certainly, the Internet can help with financing too. There are numerous mortgage comparison sites, virtually every lender is online and finance and credit information portals abound.
A home buyer with an approved mortgage -- obtained online or off -- has a negotiating edge and the financial boundaries necessary to help keep focused on a home that's truly affordable.
Only then is it time to surf for shelter.
DotHomes.com, a listing site with Google-like search features, offers these tips to help you get the most out of your online home shopping experience.
• Leverage the broker. Brokers and real estate agents are the housing market's matchmakers. They use local expertise to connect buyers and sellers. They've honed online tools to help you research, browse and focus your online search. The tools put you in touch with all the information and resources the listing agent or broker has to offer -- broker blogs, emailed updates tailored to your search, market reports tailored to your market, how-tos and other information.
• Search in real-time. Get property listings and other information electronically "fed" to you via RSS (really simple syndication) feeds, email alerts and Web updates. Electronic updates are an adjunct to your own time spent online. Alerts keep you abreast of the newest listings and reduce your need to manually check the Web again and again for updates. That's especially true when you are on the go, say driving from open house to open house. Blackberries, iPhones and other smart phones keep you connected to your search.
• Search "fresh." Avoid fringe listing sites that don't update frequently and are far removed from the original online broker's listing. If you don't, you'll miss out on listing changes and updates like new pricing information, new photos, open house dates and the like. Web sites that don't link to the original listing, lock you away from updates. Nothing is more frustrating than to find online what you consider your dream home only to soon discover that the listing was sold, removed from the market or otherwise changed beyond your requirements -- but not removed from an Internet server.
• Refine your search. Don't get overwhelmed. With so many listings on the market, both traditional listings and distressed properties, quickly navigating them all is a chore. Use online tools and Web sites that allow you to refine your property search. If you are looking for a house on a particular street, search the street. If you need a pet friendly condo, ask. Whether you know exactly what you want or are just starting to figure it out, be specific with search terms like "new roof," "three-car garage," "established landscaping," "new kitchen appliances," etc. to find the property with the features you need.
Along with the well known national listing Web sites from trade groups, large private listing portals and real estate companies, the local multiple listing service's (MLS) public access portal are among the best places to search on line because they use standard formatting and strict guidelines about adding and removing listings in a timely manner.
• Screen home movies. A picture is worth a thousand words, but a video, a virtual open house, looks like a million bucks. Kodak moments can help you get a two-dimensional feel for a property, but virtual tours add a third dimension. Videos offer a much better sense of the proportions and the feel of a property. They can also play the starring role -- as a sort of 24-hour open house -- on a Web site or blog dedicated to the listing.
Here's another browsing for housing bonus: If you buy a home with its own Web site and virtual tour, you can ask the seller to gift the Web site or blog to you!
Published: March 18, 2010
"More informed buyers, improve the transaction process," says Douglas de Jager, co-founder of DotHomes.com one of the newer online listing services on the block.
The California Association of Realtors (CAR) reports that 84 percent of home buyers use the internet as a significant part of the home buying process, according to its 2009 Survey of California Homebuyers.
"There is so much more information made available to us online, when you go to the actual home, it's just a validation process for what you've seen online," de Jager adds.
But transforming digital digs into a real home of your dreams isn't just about bandwidth and educational content.
Using the Internet to buy a home comes with the same prerequisite necessary for any buyer -- get financing locked down first.
Certainly, the Internet can help with financing too. There are numerous mortgage comparison sites, virtually every lender is online and finance and credit information portals abound.
A home buyer with an approved mortgage -- obtained online or off -- has a negotiating edge and the financial boundaries necessary to help keep focused on a home that's truly affordable.
Only then is it time to surf for shelter.
DotHomes.com, a listing site with Google-like search features, offers these tips to help you get the most out of your online home shopping experience.
• Leverage the broker. Brokers and real estate agents are the housing market's matchmakers. They use local expertise to connect buyers and sellers. They've honed online tools to help you research, browse and focus your online search. The tools put you in touch with all the information and resources the listing agent or broker has to offer -- broker blogs, emailed updates tailored to your search, market reports tailored to your market, how-tos and other information.
• Search in real-time. Get property listings and other information electronically "fed" to you via RSS (really simple syndication) feeds, email alerts and Web updates. Electronic updates are an adjunct to your own time spent online. Alerts keep you abreast of the newest listings and reduce your need to manually check the Web again and again for updates. That's especially true when you are on the go, say driving from open house to open house. Blackberries, iPhones and other smart phones keep you connected to your search.
• Search "fresh." Avoid fringe listing sites that don't update frequently and are far removed from the original online broker's listing. If you don't, you'll miss out on listing changes and updates like new pricing information, new photos, open house dates and the like. Web sites that don't link to the original listing, lock you away from updates. Nothing is more frustrating than to find online what you consider your dream home only to soon discover that the listing was sold, removed from the market or otherwise changed beyond your requirements -- but not removed from an Internet server.
• Refine your search. Don't get overwhelmed. With so many listings on the market, both traditional listings and distressed properties, quickly navigating them all is a chore. Use online tools and Web sites that allow you to refine your property search. If you are looking for a house on a particular street, search the street. If you need a pet friendly condo, ask. Whether you know exactly what you want or are just starting to figure it out, be specific with search terms like "new roof," "three-car garage," "established landscaping," "new kitchen appliances," etc. to find the property with the features you need.
Along with the well known national listing Web sites from trade groups, large private listing portals and real estate companies, the local multiple listing service's (MLS) public access portal are among the best places to search on line because they use standard formatting and strict guidelines about adding and removing listings in a timely manner.
• Screen home movies. A picture is worth a thousand words, but a video, a virtual open house, looks like a million bucks. Kodak moments can help you get a two-dimensional feel for a property, but virtual tours add a third dimension. Videos offer a much better sense of the proportions and the feel of a property. They can also play the starring role -- as a sort of 24-hour open house -- on a Web site or blog dedicated to the listing.
Here's another browsing for housing bonus: If you buy a home with its own Web site and virtual tour, you can ask the seller to gift the Web site or blog to you!
Published: March 18, 2010
Sam Zell: Recovery Is Underway
Sam Zell, the billionaire investor who made his fortune in real estate, told Bloomberg News yesterday that he expects the U.S. housing market to start recovering at the end of 2010 and strengthen in the middle of 2011.
Zell, who according to the Forbes’ tally is the 237th richest person in the world, said, “Conditions are getting better, but there’s a lot of uncertainty. The real question is: Can confidence return enough so that what you call the green shoots can continue forward?”
Zell said he expects more turmoil in the commercial real estate business, pointing toward General Growth Properties Inc., the mall owner that is fighting a takeover, as an example.
Source: Bloomberg, Rita Nazareth (03/16/2010)
Zell, who according to the Forbes’ tally is the 237th richest person in the world, said, “Conditions are getting better, but there’s a lot of uncertainty. The real question is: Can confidence return enough so that what you call the green shoots can continue forward?”
Zell said he expects more turmoil in the commercial real estate business, pointing toward General Growth Properties Inc., the mall owner that is fighting a takeover, as an example.
Source: Bloomberg, Rita Nazareth (03/16/2010)
Tips for Boomers: Benefits of Downsizing
For anyone approaching retirement, now could be a great time to move.
Here are some tips for Boomers considering downsizing:
*Don’t miss out on the $6,500 move-up tax credit. *Consider a short-distance move if it provides savings and convenience. *Anyone moving out of state should figure the tax consequences in their new location. *Consider a property that offers features allowing Boomers to age gracefully. *Think about sharing space with a younger (or older) family member. *Insist on good security in the new property. *Look for homes that don’t require a lot of maintenance. *Go green. It will pay off down the road.
Source: Forbes, Ashlea Ebeling (03/16/2010)
Fed To Stop Buying MBS The Federal Reserve renewed its commitment to keep key interest rates near zero for an “extended period,” but also confirmed that it will stop buying mortgage-backed securities at the end of March.
The Fed, whose regular meeting began Tuesday, said that “housing starts have been flat at depressed levels” and “employers remain reluctant to add to payrolls” as a reason for extending the cap on interest rates.
“The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability,” the Federal Open Market Committee statement said.
Source: Bloomberg, Craig Torres and Scott Lanman (03/16/2010)
Find Your Path HomeCENTURY 21: The Gold Standard
Find Your Path HomeCENTURY 21: The Gold StandardDRE License Number(s): 00656946 Find Your Path HomeEmail Us Visit Our WebSite
Here are some tips for Boomers considering downsizing:
*Don’t miss out on the $6,500 move-up tax credit. *Consider a short-distance move if it provides savings and convenience. *Anyone moving out of state should figure the tax consequences in their new location. *Consider a property that offers features allowing Boomers to age gracefully. *Think about sharing space with a younger (or older) family member. *Insist on good security in the new property. *Look for homes that don’t require a lot of maintenance. *Go green. It will pay off down the road.
Source: Forbes, Ashlea Ebeling (03/16/2010)
Fed To Stop Buying MBS The Federal Reserve renewed its commitment to keep key interest rates near zero for an “extended period,” but also confirmed that it will stop buying mortgage-backed securities at the end of March.
The Fed, whose regular meeting began Tuesday, said that “housing starts have been flat at depressed levels” and “employers remain reluctant to add to payrolls” as a reason for extending the cap on interest rates.
“The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability,” the Federal Open Market Committee statement said.
Source: Bloomberg, Craig Torres and Scott Lanman (03/16/2010)
Find Your Path HomeCENTURY 21: The Gold Standard
Find Your Path HomeCENTURY 21: The Gold StandardDRE License Number(s): 00656946 Find Your Path HomeEmail Us Visit Our WebSite
Real Estate Outlook: Positive Signs of Recovery
Positive signs on employment and national economic growth should start being felt in the housing market in the coming several months, say top economists.
The Labor Department reports that there were 2.7 million job openings last month -- 200,000 more than in the same survey the month before.
Meanwhile, the consensus forecast among private and government economists for the main barometer of the U.S. economy's health, gross domestic product or GDP, is for a very solid 3 percent during the first quarter.
Alan Levenson, chief economist for T.Rowe Price Associates, said the latest reports are “indicative of a labor market and economy that is in the midst of recovery.”
That's hugely important for real estate because expanding employment created by a rowing national economy are the essential fuels to power housing demand and sales.
Even though harsh weather conditions knocked the wind out of pending home sales and real estate shopping in many areas during January and February, analysts say the spring and summer market should be strong.
Lawrence Yun, chief economist for the National Association of Realtors, says the $8,000 and $6,500 federal home purchase tax credits that expire at the end of April for signed contracts -- and the end of June for closed deals -- should squeeze a lot of sales volume into the spring and early summer months.
Assuming slow but steady improvement in the jobs picture, Yun forecasts a solid second half of the year as well.
On the home pricing front, evidence continues to mount that in most parts of the country, home values have either bottomed out or have turned positive.
The most recent Case- Shiller index numbers on the top 20 metropolitan markets bear that out -- and last week's Zillow home value report found values essentially flat on a national average basis. They were down by just three tenths of a percent, but up in some major markets of note.
For example, Boston's home values are up nearly two percent year-over-year, according to Zillow, and Los Angeles, San Diego, Denver and Philadelphia have registered gains after long periods of negative numbers.
Two other statistical hints that conditions are improving: The difference between listed prices and selling prices of home nationwide is now smaller than it's been in a year, according to real estate research site Trulia.com.
And Realty Trac fond that foreclosures, which are clearly still a massive drag on the market -- dropped by two percent last month -- the second straight month of decline.
In a tough market, I guess we should appreciate even the smallest of improvements.
Published: March 15, 2010
The Labor Department reports that there were 2.7 million job openings last month -- 200,000 more than in the same survey the month before.
Meanwhile, the consensus forecast among private and government economists for the main barometer of the U.S. economy's health, gross domestic product or GDP, is for a very solid 3 percent during the first quarter.
Alan Levenson, chief economist for T.Rowe Price Associates, said the latest reports are “indicative of a labor market and economy that is in the midst of recovery.”
That's hugely important for real estate because expanding employment created by a rowing national economy are the essential fuels to power housing demand and sales.
Even though harsh weather conditions knocked the wind out of pending home sales and real estate shopping in many areas during January and February, analysts say the spring and summer market should be strong.
Lawrence Yun, chief economist for the National Association of Realtors, says the $8,000 and $6,500 federal home purchase tax credits that expire at the end of April for signed contracts -- and the end of June for closed deals -- should squeeze a lot of sales volume into the spring and early summer months.
Assuming slow but steady improvement in the jobs picture, Yun forecasts a solid second half of the year as well.
On the home pricing front, evidence continues to mount that in most parts of the country, home values have either bottomed out or have turned positive.
The most recent Case- Shiller index numbers on the top 20 metropolitan markets bear that out -- and last week's Zillow home value report found values essentially flat on a national average basis. They were down by just three tenths of a percent, but up in some major markets of note.
For example, Boston's home values are up nearly two percent year-over-year, according to Zillow, and Los Angeles, San Diego, Denver and Philadelphia have registered gains after long periods of negative numbers.
Two other statistical hints that conditions are improving: The difference between listed prices and selling prices of home nationwide is now smaller than it's been in a year, according to real estate research site Trulia.com.
And Realty Trac fond that foreclosures, which are clearly still a massive drag on the market -- dropped by two percent last month -- the second straight month of decline.
In a tough market, I guess we should appreciate even the smallest of improvements.
Published: March 15, 2010
Housing Experts Say Real Estate is Recovering
Some of the nation’s top economists believe the housing market has turned and better days are on the way for the housing industry.
Increases in jobs, credit, and affordable homes will overcome impediments such as rising interest rates, and the expiration of the Federal stimulus program to push the housing market toward recovery, says Dean Maki, chief U.S. economist for Barclays Capital.
“I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” says Karl Case, co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College.
“The underlying trend is turning positive,” says Bruce Kasman, chief economist at JPMorgan Chase & Co.
Source: Bloomberg, Kathleen M. Howley and Rich Miller (03/15/2010)
Increases in jobs, credit, and affordable homes will overcome impediments such as rising interest rates, and the expiration of the Federal stimulus program to push the housing market toward recovery, says Dean Maki, chief U.S. economist for Barclays Capital.
“I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” says Karl Case, co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College.
“The underlying trend is turning positive,” says Bruce Kasman, chief economist at JPMorgan Chase & Co.
Source: Bloomberg, Kathleen M. Howley and Rich Miller (03/15/2010)
State law to save foreclosure victims from losing shirt on taxes
State legislation to protect people who lose their houses in foreclosure or short sales from a big tax bill passed a significant hurdle yesterday, when the Assembly gave its approval, shipping the proposal to the Senate for an expected vote on Thursday.
Passing the Assembly by a 47-27 vote, the bill authored by Sen. Lois Wolk (D-Davis) would exempt people who did short sales or received loan modifications or lost their houses in foreclosure last year from having to pay state tax on any mortgage debt that was forgiven. Otherwise the forgiven debt would be considered income for the homeowners even though they received no money from the sale of their home.
"As so many Californians are forced to walk away from their homes, their largest investment, the last thing they should have to think about is paying taxes on debt they couldn't repay," said Wolk an an e-mail.
Both the state and federal government extended a lifeline to homeowners in 2007 when the market was flooded with mortgage failures by temporarily exempting the tax on forgiven debt. However, while the federal exemption continues through 2012, the state's expired at the end of 2008.
With an April 15 tax deadline approaching, tax accountants say many of their clients are scared and uncertain how they would pay the added tax if the state does not pass legislation, which is designed to bring the state tax code in conformity with federal tax policy.
Brian Winter, a tax preparer at Jackson Hewitt in Riverside said a lot of his clients facing a big state tax bill because of the expiration of the state exemption don't have jobs or enough money to meet the obligation.
Noting that houses in Inland Southern California frequently are selling for hundreds of thousands of dollars less than the mortgages owed on them, Winter said he figures that some of his clients who have gone through foreclosures or short sales could see their state tax bills increase by $4,000 to $20,000.
Hewitt said a person with an annual income of $50,000 and $100,000 of debt cancelled on a house would be "on the hook" for about $8000 in additional income tax. He said most likely some of his clients would be forced into bankruptcy.
Many people who thought they were exempt from the debt forgiveness tax under both the state and federal law, Hewitt said, were shocked to receive 1099 forms in the mail from their lenders that need to be filed with their tax returns to report the cancelled debt.
As state law now stands not all homeowners who have a foreclosure, short sale or loan modification will take a state tax hit. According to the Senate Revenue and Taxation Committee, for example, debt forgiven on a first mortgage used to buy a house even now is not taxable. That is not true, however, if the original mortgage is refinanced and money taken out to buy a car or for another investment.
Hewitt said he understands that currently debt forgiven on refinancings done to raise money for home improvements or simply to get a lower monthly mortgage payment also are exempt from state tax. Also only a loan modification in which lower payments were accomplished by reducing the balance owed, not ones achieved by merely lowering an interest rate, are subject to state tax, he said.
Sandi Aplin, a tax accountant in Moreno Valley, said the tax laws pertaining to forgiven debt are very complex and require the attention of a professional tax preparer. She advised that those who have had mortgage debt forgiven should apply for extensions on filing their 2009 state tax returns to give the state government time to take action to help them.
Hewitt said he recommends that his clients hold off on preparing their state tax returns until the first week in April.
Prospects for the Wolk legislation are clouded by uncertainty whether Gov. Schwarzenegger will sign it. The governor vetoed similar federal conforming legislation in the past because of the attachment of a provision that would establish new tax penalties on individuals and businesses that file unfounded claims for tax refunds.
Craig Reynolds, Wolk's chief of staff, said a clause with the same purpose is included in the new legislation but the proposed penalties are narrowed to apply only to larger, sophistocated businesses and the super-wealthy who can afford tax advisors.
The governor has argued that the controversial clause should be taken out of the bill and considered in separate legislation, said Schwarzenegger Secretary Aaron McLear. --Leslie Berkman
Passing the Assembly by a 47-27 vote, the bill authored by Sen. Lois Wolk (D-Davis) would exempt people who did short sales or received loan modifications or lost their houses in foreclosure last year from having to pay state tax on any mortgage debt that was forgiven. Otherwise the forgiven debt would be considered income for the homeowners even though they received no money from the sale of their home.
"As so many Californians are forced to walk away from their homes, their largest investment, the last thing they should have to think about is paying taxes on debt they couldn't repay," said Wolk an an e-mail.
Both the state and federal government extended a lifeline to homeowners in 2007 when the market was flooded with mortgage failures by temporarily exempting the tax on forgiven debt. However, while the federal exemption continues through 2012, the state's expired at the end of 2008.
With an April 15 tax deadline approaching, tax accountants say many of their clients are scared and uncertain how they would pay the added tax if the state does not pass legislation, which is designed to bring the state tax code in conformity with federal tax policy.
Brian Winter, a tax preparer at Jackson Hewitt in Riverside said a lot of his clients facing a big state tax bill because of the expiration of the state exemption don't have jobs or enough money to meet the obligation.
Noting that houses in Inland Southern California frequently are selling for hundreds of thousands of dollars less than the mortgages owed on them, Winter said he figures that some of his clients who have gone through foreclosures or short sales could see their state tax bills increase by $4,000 to $20,000.
Hewitt said a person with an annual income of $50,000 and $100,000 of debt cancelled on a house would be "on the hook" for about $8000 in additional income tax. He said most likely some of his clients would be forced into bankruptcy.
Many people who thought they were exempt from the debt forgiveness tax under both the state and federal law, Hewitt said, were shocked to receive 1099 forms in the mail from their lenders that need to be filed with their tax returns to report the cancelled debt.
As state law now stands not all homeowners who have a foreclosure, short sale or loan modification will take a state tax hit. According to the Senate Revenue and Taxation Committee, for example, debt forgiven on a first mortgage used to buy a house even now is not taxable. That is not true, however, if the original mortgage is refinanced and money taken out to buy a car or for another investment.
Hewitt said he understands that currently debt forgiven on refinancings done to raise money for home improvements or simply to get a lower monthly mortgage payment also are exempt from state tax. Also only a loan modification in which lower payments were accomplished by reducing the balance owed, not ones achieved by merely lowering an interest rate, are subject to state tax, he said.
Sandi Aplin, a tax accountant in Moreno Valley, said the tax laws pertaining to forgiven debt are very complex and require the attention of a professional tax preparer. She advised that those who have had mortgage debt forgiven should apply for extensions on filing their 2009 state tax returns to give the state government time to take action to help them.
Hewitt said he recommends that his clients hold off on preparing their state tax returns until the first week in April.
Prospects for the Wolk legislation are clouded by uncertainty whether Gov. Schwarzenegger will sign it. The governor vetoed similar federal conforming legislation in the past because of the attachment of a provision that would establish new tax penalties on individuals and businesses that file unfounded claims for tax refunds.
Craig Reynolds, Wolk's chief of staff, said a clause with the same purpose is included in the new legislation but the proposed penalties are narrowed to apply only to larger, sophistocated businesses and the super-wealthy who can afford tax advisors.
The governor has argued that the controversial clause should be taken out of the bill and considered in separate legislation, said Schwarzenegger Secretary Aaron McLear. --Leslie Berkman
Low Rates Help Make Home Buying More Affordable
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.97 percent with an average 0.7 point for the week ending March 4, 2010, down from last week when it averaged 5.05 percent. Last year at this time, the 30-year FRM averaged 5.15 percent.
The 15-year FRM this week averaged 4.33 percent with an average 0.7 point, down from last week when it averaged 4.40 percent. A year ago at this time, the 15-year FRM averaged 4.72 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.11 percent this week, with an average 0.6 point, down from last week when it averaged 4.16 percent. A year ago, the 5-year ARM averaged 5.08 percent.
The 1-year Treasury-indexed ARM averaged 4.27 percent this week with an average 0.6 point, up from last week when it averaged 4.15 percent. At this time last year, the 1-year ARM averaged 4.86 percent.
"30-year fixed mortgages fell below 5 percent to match levels seen two weeks ago and are helping to maintain affordable home-purchase conditions," said Frank Nothaft, Freddie Mac vice president and chief economist. "In fact, monthly principal and interest mortgage payments for a typical family buying a median-priced home of $163,800 were just $709 in January, the lowest amount since February 1998, according to the National Association of Realtors® . For first-time homebuyers, the fourth quarter of 2009 was the third most affordable quarter since 1981 behind the first and second quarter of 2009."
"The federal tax credit for homebuyers, which expires on April 30th, may make housing even more affordable for some families already in the middle of the home buying process. In fact, the Federal Reserve's March 3rd regional economic review noted that several districts attributed stronger home sales to the homebuyer tax credit."
Published: March 5, 2010
The 15-year FRM this week averaged 4.33 percent with an average 0.7 point, down from last week when it averaged 4.40 percent. A year ago at this time, the 15-year FRM averaged 4.72 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.11 percent this week, with an average 0.6 point, down from last week when it averaged 4.16 percent. A year ago, the 5-year ARM averaged 5.08 percent.
The 1-year Treasury-indexed ARM averaged 4.27 percent this week with an average 0.6 point, up from last week when it averaged 4.15 percent. At this time last year, the 1-year ARM averaged 4.86 percent.
"30-year fixed mortgages fell below 5 percent to match levels seen two weeks ago and are helping to maintain affordable home-purchase conditions," said Frank Nothaft, Freddie Mac vice president and chief economist. "In fact, monthly principal and interest mortgage payments for a typical family buying a median-priced home of $163,800 were just $709 in January, the lowest amount since February 1998, according to the National Association of Realtors® . For first-time homebuyers, the fourth quarter of 2009 was the third most affordable quarter since 1981 behind the first and second quarter of 2009."
"The federal tax credit for homebuyers, which expires on April 30th, may make housing even more affordable for some families already in the middle of the home buying process. In fact, the Federal Reserve's March 3rd regional economic review noted that several districts attributed stronger home sales to the homebuyer tax credit."
Published: March 5, 2010
Pre-Qualifying for a Mortgage
One of the first steps to take as a potential home buyer is to get pre-qualified for a loan. This step helps both you and your lender learn just how much home you can afford. And you should begin this process before you even start looking for a home.
According to the Federal Housing Administration (FHA), their pre-qualification essentials include:
Having a steady employment history, at least two years with the same employer.
Consistent or increasing income over the past two years.
Credit report should be in good standing with less than two thirty day late payments in the past two years.
Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
Any foreclosure must be at least three years old with good credit for the past three years.
Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
Other lenders' ideas regarding pre-qualification are all similar to those outlined above. A mortgage lender will look at your credit report, earnings, debts, and savings in order to see how much home you really can afford.
Why is this important? In recent years there has been a “mortgage crisis,” where the industry was rampant with fraud and with loans that put homeowners into situations they could not afford. As payments rose, homeowners found themselves unable to meet their monthly obligations. According to Realtytrac.com and their U.S. Foreclosure Market Report, in January 2010, one in every 409 households in the country had received a foreclosure filing.
Since pre-qualification for a home loan typically costs you nothing, but gives you both a goal of what homes are in your affordability range, as well as how much money you should look to have saved for a downpayment, you can hardly wait to take this step.
What if the home you want is out of your reach? Experts recommend reducing your debt and saving up a larger amount for your down payment. Let's say your dream home is $225,000, but you only qualify for a $180,000 loan. If you have a downpayment of $45,000, then you are ready to make a move!
During the pre-qualification process, you will be expected to provide the following information:
your gross monthly income
your total monthly payments (car payments, credit cards minimums, child support payments, student loan payments, any other monthly debts)
The lender will be looking to see that your debt to income is below about 40 percent, and the lower the better. So, if you are looking to buy in the near future, be sure to talk to your lender soon!
According to the Federal Housing Administration (FHA), their pre-qualification essentials include:
Having a steady employment history, at least two years with the same employer.
Consistent or increasing income over the past two years.
Credit report should be in good standing with less than two thirty day late payments in the past two years.
Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
Any foreclosure must be at least three years old with good credit for the past three years.
Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
Other lenders' ideas regarding pre-qualification are all similar to those outlined above. A mortgage lender will look at your credit report, earnings, debts, and savings in order to see how much home you really can afford.
Why is this important? In recent years there has been a “mortgage crisis,” where the industry was rampant with fraud and with loans that put homeowners into situations they could not afford. As payments rose, homeowners found themselves unable to meet their monthly obligations. According to Realtytrac.com and their U.S. Foreclosure Market Report, in January 2010, one in every 409 households in the country had received a foreclosure filing.
Since pre-qualification for a home loan typically costs you nothing, but gives you both a goal of what homes are in your affordability range, as well as how much money you should look to have saved for a downpayment, you can hardly wait to take this step.
What if the home you want is out of your reach? Experts recommend reducing your debt and saving up a larger amount for your down payment. Let's say your dream home is $225,000, but you only qualify for a $180,000 loan. If you have a downpayment of $45,000, then you are ready to make a move!
During the pre-qualification process, you will be expected to provide the following information:
your gross monthly income
your total monthly payments (car payments, credit cards minimums, child support payments, student loan payments, any other monthly debts)
The lender will be looking to see that your debt to income is below about 40 percent, and the lower the better. So, if you are looking to buy in the near future, be sure to talk to your lender soon!
Real Estate Outlook: Federal Reserve Beige Book
If you're trying to figure out where real estate is headed in the coming months, should you listen to the Federal Reserve -- or do you focus on the latest pending home sales numbers?
Probably both, but here's a key fact: The Fed's latest "Beige Book" report -- based on economic data from each of its 12 regional member banks -- found positive signs in nine of the 12 regions it covered.
Despite blizzards and bad weather in January and early February in large portions of the country, the Fed's regional banks found consumer spending and manufacturing output increasing.
Both are key indicators of improving economic conditions ahead, especially consumer spending, which accounts for 70 percent of U.S. economic activity and directly affects employment growth.
In fact, according to a separate report issued by the Commerce Department last week, consumer spending increased by one half of one percent in January - outpacing income growth for the fourth straight month.
What does that signify? Consumers are slowly coming out of their shells, regaining confidence, and beginning to feel good again about buying more goods and services.
On the housing front, the National Association of Realtors reported last week that the severe weather that paralyzed entire sections of the country also put a damper on home shopping last month - knocking down pending home sales by 7.6 percent in the process.
Nonetheless, said Lawrence Yun, chief economist for the Realtors, pending home sales - signed contracts that have not yet gone to closing -- still came in 12 percent higher in January than they were the year before.
Plus, they are likely to bounce back strongly in the next couple of months as buyers rush to sign contracts to qualify for the expiring home purchase tax credits.
Even home prices nationally are showing hints of slow improvement. According to the latest Clear Capital price index, which is based on information from thousands of neighborhoods and Zip code-level reports, prices rose by 5 percent on average for the most recent quarter on a year-over-year basis.
Metropolitan Boston, which was one of the earliest markets to signal the price downturns following the boom, saw values up by nearly seven percent, year over year, according to Clear Capital' index.
All of this is being helped along by continuing favorable financing conditions in the mortgage markets. Applications for new mortgages to purchase houses in the coming several months were up by 12 percent last week, according to the Mortgage Bankers Association.
Thirty year fixed rate loans dipped to 4.9 percent, while 15 year fixed rate were flat at 4.3 percent.
Published: March 8, 2010
Probably both, but here's a key fact: The Fed's latest "Beige Book" report -- based on economic data from each of its 12 regional member banks -- found positive signs in nine of the 12 regions it covered.
Despite blizzards and bad weather in January and early February in large portions of the country, the Fed's regional banks found consumer spending and manufacturing output increasing.
Both are key indicators of improving economic conditions ahead, especially consumer spending, which accounts for 70 percent of U.S. economic activity and directly affects employment growth.
In fact, according to a separate report issued by the Commerce Department last week, consumer spending increased by one half of one percent in January - outpacing income growth for the fourth straight month.
What does that signify? Consumers are slowly coming out of their shells, regaining confidence, and beginning to feel good again about buying more goods and services.
On the housing front, the National Association of Realtors reported last week that the severe weather that paralyzed entire sections of the country also put a damper on home shopping last month - knocking down pending home sales by 7.6 percent in the process.
Nonetheless, said Lawrence Yun, chief economist for the Realtors, pending home sales - signed contracts that have not yet gone to closing -- still came in 12 percent higher in January than they were the year before.
Plus, they are likely to bounce back strongly in the next couple of months as buyers rush to sign contracts to qualify for the expiring home purchase tax credits.
Even home prices nationally are showing hints of slow improvement. According to the latest Clear Capital price index, which is based on information from thousands of neighborhoods and Zip code-level reports, prices rose by 5 percent on average for the most recent quarter on a year-over-year basis.
Metropolitan Boston, which was one of the earliest markets to signal the price downturns following the boom, saw values up by nearly seven percent, year over year, according to Clear Capital' index.
All of this is being helped along by continuing favorable financing conditions in the mortgage markets. Applications for new mortgages to purchase houses in the coming several months were up by 12 percent last week, according to the Mortgage Bankers Association.
Thirty year fixed rate loans dipped to 4.9 percent, while 15 year fixed rate were flat at 4.3 percent.
Published: March 8, 2010
Home Prices May Be Flat for Years (?????)
Housing prices are unlikely to fall much farther, but they aren’t going to rise either — at least for several years — predict analysts for Barclays Capital in its Residential Credit Strategy report.
Barclays blames government programs that have slowed foreclosures. “The overhang of distressed inventory is a huge negative technical. It suggests that any price rise will probably be met by increased distressed sales,” the report says.
The report also concludes that home prices are cheaper than rents and incomes suggest they should be, “but not extremely so.”
Source: Property Wire (03/03/2010)
Barclays blames government programs that have slowed foreclosures. “The overhang of distressed inventory is a huge negative technical. It suggests that any price rise will probably be met by increased distressed sales,” the report says.
The report also concludes that home prices are cheaper than rents and incomes suggest they should be, “but not extremely so.”
Source: Property Wire (03/03/2010)
Fraud Didn't Cause Housing Meltdown
The financial crisis was the result of home buyers’ rational reactions to misaligned incentives – not fraud, argues Todd Zywicki, a George Mason University law professor and a Mercatus Center senior scholar.
Zywicki, who has studied the financial meltdown, argues that taking out a risky bank loan looks like a foolish choice today, but at the height of the housing boom was actually a smart decision for many people.
He says the crisis began when the Federal Reserve pushed interest rates to extreme lows from 2001 to 2004, making adjustable rate loans very attractive. It wasn’t until the Fed pushed rates back up that people walked away from their loans.
In the next phase of the crisis, Zywicki says, the availability of foreclosed properties pushed down home prices, which led to more home owners walking away from their properties. Now in the current phase of the decline, unemployment has led to even more foreclosures.
Zywicki writes: “The problem isn't consumer gullibility or ignorance. Borrowers have shown they understand, and act on, the incentives they face all too well.”
Source: The Wall Street Journal, Todd Zywicki (02/19/2010)
Zywicki, who has studied the financial meltdown, argues that taking out a risky bank loan looks like a foolish choice today, but at the height of the housing boom was actually a smart decision for many people.
He says the crisis began when the Federal Reserve pushed interest rates to extreme lows from 2001 to 2004, making adjustable rate loans very attractive. It wasn’t until the Fed pushed rates back up that people walked away from their loans.
In the next phase of the crisis, Zywicki says, the availability of foreclosed properties pushed down home prices, which led to more home owners walking away from their properties. Now in the current phase of the decline, unemployment has led to even more foreclosures.
Zywicki writes: “The problem isn't consumer gullibility or ignorance. Borrowers have shown they understand, and act on, the incentives they face all too well.”
Source: The Wall Street Journal, Todd Zywicki (02/19/2010)
Bankers: The End of Foreclosure Crisis is Near
The Mortgage Bankers Association is seeing signs that the foreclosure crisis is ending.
“The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” says Jay Brinkmann, MBA’s chief economist, in a published statement.
Brinkmann said that normally there is a large spike in short-term mortgage delinquencies at the end of the year because of high heating bills and holiday expenditures. This year, there was not only no spike, but the 30-day delinquency rate actually fell from 3.79 percent to 3.63 percent.
Thirty-day delinquencies have historically been a leading indicator of serious delinquencies and foreclosures, Brinkmann said.
“[This] gives us growing confidence that the size of the problem now is about as bad as it will get,” he said.
Source: Mortgage Bankers Association (02/19/2010)
“The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” says Jay Brinkmann, MBA’s chief economist, in a published statement.
Brinkmann said that normally there is a large spike in short-term mortgage delinquencies at the end of the year because of high heating bills and holiday expenditures. This year, there was not only no spike, but the 30-day delinquency rate actually fell from 3.79 percent to 3.63 percent.
Thirty-day delinquencies have historically been a leading indicator of serious delinquencies and foreclosures, Brinkmann said.
“[This] gives us growing confidence that the size of the problem now is about as bad as it will get,” he said.
Source: Mortgage Bankers Association (02/19/2010)
Could the Tax Credit Be Extended Again?
The pressure is increasing on Congress to renew the homebuyer tax credits for a third time.
The first $7,500 tax credit was passed in 2008 and required first-time buyers to repay the credit over 15 years. A few months later in 2009, Congress expanded the credit to a maximum of $8,000 that didn’t have to be paid back.
At the end of last year, Congress extended the benefit again until April 30 with an extra two months on top of that to close. A new credit of $6,500 was added for move-up buyers, too.
Now representatives of the housing industry are lobbying for another extension. Some experts, including Mark Zandi, chief economist at Moody’s Economy.com, who supported the earlier credits, think the time has come to let it go.
“It’s worn out its benefit,” he says. “If you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.”
Source: The Wall Street Journal, Nick Timiraos (02/22/2010)
The first $7,500 tax credit was passed in 2008 and required first-time buyers to repay the credit over 15 years. A few months later in 2009, Congress expanded the credit to a maximum of $8,000 that didn’t have to be paid back.
At the end of last year, Congress extended the benefit again until April 30 with an extra two months on top of that to close. A new credit of $6,500 was added for move-up buyers, too.
Now representatives of the housing industry are lobbying for another extension. Some experts, including Mark Zandi, chief economist at Moody’s Economy.com, who supported the earlier credits, think the time has come to let it go.
“It’s worn out its benefit,” he says. “If you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.”
Source: The Wall Street Journal, Nick Timiraos (02/22/2010)
IRS Clarifies What's Needed to Claim Tax Credit
The Internal Revenue Service has clarified which documentation taxpayers need to submit to claim the first-time and move-up homebuyer tax credit.
While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common.
The IRS clarification says: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. … The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.”
For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or mortgage interest statements.
While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common.
The IRS clarification says: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. … The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.”
For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or mortgage interest statements.
Good real estate news: Home equity is rising again
Numerous articles have reported that homeowners are underwater and that strategic defaults are increasing. However, a little known statistic by the Federal Reserve shows that home equity again is on the rise.
MAKING SENSE OF THE STORY FOR CONSUMERS
The Federal Reserve conducts substantial research on mortgage balances and home-value changes in hundreds of local markets nationwide and reports its finding quarterly. According to the Fed’s most recent “flow of funds” survey, homeowners’ net equity increased by nearly $1 trillion compared with the recession’s lowest point between the first and third quarters of 2009. From June 30 to Sept. 30, net equity rose by $418 billion.
According to a report by Zillow.com, the overall negative equity rate among U.S. homeowners remained flat in the fourth quarter at 21.4 percent. This report, combined with other housing factors and studies, may indicate that the unprecedented reduction in home equity is shifting.
Some homeowners, especially those in areas with high foreclosure rates, are choosing to strategically default on their mortgages, even though they can afford the mortgage. Many homeowners who choose this approach do so because they do not see an economic rationale in continuing to make their mortgage payments. Homeowners considering this option should be aware of the negative effect it will have on their credit status. Foreclosures can remain on credit reports for up to seven years, likely increasing the interest rates the consumer pays for credit, and making it more difficult to receive approval on a new mortgage loan.
MAKING SENSE OF THE STORY FOR CONSUMERS
The Federal Reserve conducts substantial research on mortgage balances and home-value changes in hundreds of local markets nationwide and reports its finding quarterly. According to the Fed’s most recent “flow of funds” survey, homeowners’ net equity increased by nearly $1 trillion compared with the recession’s lowest point between the first and third quarters of 2009. From June 30 to Sept. 30, net equity rose by $418 billion.
According to a report by Zillow.com, the overall negative equity rate among U.S. homeowners remained flat in the fourth quarter at 21.4 percent. This report, combined with other housing factors and studies, may indicate that the unprecedented reduction in home equity is shifting.
Some homeowners, especially those in areas with high foreclosure rates, are choosing to strategically default on their mortgages, even though they can afford the mortgage. Many homeowners who choose this approach do so because they do not see an economic rationale in continuing to make their mortgage payments. Homeowners considering this option should be aware of the negative effect it will have on their credit status. Foreclosures can remain on credit reports for up to seven years, likely increasing the interest rates the consumer pays for credit, and making it more difficult to receive approval on a new mortgage loan.
Washington Report
Housing lobbyists began rolling out their heavy artillery on Capitol Hill last week, determined to blast the Obama administration's plan to cut home mortgage interest and property tax deductions for high-income individuals and couples.
The National Association of Realtors sent blunt letters to the chairmen of the House and Senate tax-writing committees calling on them to derail the Obama proposal at their earliest opportunity,
In nearly-identical letters to House Ways and Means Committee chairman Charles Rangel and Senate Finance Committee chairman Max Baucus, the association's president, Vicki Cox Golder, warned that reducing tax system support for housing - even at the upper margins - would be bad for the entire real estate market.
Golder, a Realtor from Arizona, said "today's housing market, while improving, cannot absorb any negative signals, no matter what the income level of the taxpayer, and no matter what market segment would be affected."
She added that her 1.1 million member group "rejects in the strongest possible terms ANY proposal that would limit the deductions for mortgage interest and real estate taxes."
The Obama plan would limit the effective value of mortgage interest and local property tax writeoffs to a maximum 28 percent for high income taxpayers -- even though under current law they can write off up to 35 percent.
The plan would apply to all single taxpayers with more than $200,000 in adjusted gross income and tofo married couples earning more than $250,000 filing jointly.
The White House estimates its plan would raise nearly $300 billion in federal revenues during the coming ten years.
Obama also wants to raise maximum tax brackets back to 39.6 percent, up from the current 35 percent ceiling, and raise the capital gains tax for high-income taxpayers back to 20 percent, from the current 15 percent.
Both of these changes would fulfill Obama campaign promises to allow tax cuts enacted during the Bush administration to expire at the end of this year. The changes would bring in close to $700 billion in revenues over ten years.
Though Golder's requests to the tax committee chairmen did not specifically address the tax bracket or capital gains changes, her association is expected to push for an extension of the Bush tax cuts later this year.
In a separate communication to members last week, the National Association of Realtors revealed that it intends shortly to "launch a multi-phase plan of action to eliminate" the mortgage interest and property tax proposals.
Other groups, including the National Association of Home Builders, the Mortgage Bankers Association and other financial industry lobbies are expected to take part in the lobbying effort.
The National Association of Realtors sent blunt letters to the chairmen of the House and Senate tax-writing committees calling on them to derail the Obama proposal at their earliest opportunity,
In nearly-identical letters to House Ways and Means Committee chairman Charles Rangel and Senate Finance Committee chairman Max Baucus, the association's president, Vicki Cox Golder, warned that reducing tax system support for housing - even at the upper margins - would be bad for the entire real estate market.
Golder, a Realtor from Arizona, said "today's housing market, while improving, cannot absorb any negative signals, no matter what the income level of the taxpayer, and no matter what market segment would be affected."
She added that her 1.1 million member group "rejects in the strongest possible terms ANY proposal that would limit the deductions for mortgage interest and real estate taxes."
The Obama plan would limit the effective value of mortgage interest and local property tax writeoffs to a maximum 28 percent for high income taxpayers -- even though under current law they can write off up to 35 percent.
The plan would apply to all single taxpayers with more than $200,000 in adjusted gross income and tofo married couples earning more than $250,000 filing jointly.
The White House estimates its plan would raise nearly $300 billion in federal revenues during the coming ten years.
Obama also wants to raise maximum tax brackets back to 39.6 percent, up from the current 35 percent ceiling, and raise the capital gains tax for high-income taxpayers back to 20 percent, from the current 15 percent.
Both of these changes would fulfill Obama campaign promises to allow tax cuts enacted during the Bush administration to expire at the end of this year. The changes would bring in close to $700 billion in revenues over ten years.
Though Golder's requests to the tax committee chairmen did not specifically address the tax bracket or capital gains changes, her association is expected to push for an extension of the Bush tax cuts later this year.
In a separate communication to members last week, the National Association of Realtors revealed that it intends shortly to "launch a multi-phase plan of action to eliminate" the mortgage interest and property tax proposals.
Other groups, including the National Association of Home Builders, the Mortgage Bankers Association and other financial industry lobbies are expected to take part in the lobbying effort.
What you should know about the market:
• One of the most important steps a home buyer can take when deciding which home to purchase is to
conduct “drive bys” of the house and the neighborhood at various times of the day and on both
weekdays and weekends. Taking the extra time to research the neighborhood will help determine if
there is too much or too little social activity for the home buyer’s lifestyle; if there are barking dogs in
the house next door; and if the home is located on a street with a lot of traffic during commute times.
conduct “drive bys” of the house and the neighborhood at various times of the day and on both
weekdays and weekends. Taking the extra time to research the neighborhood will help determine if
there is too much or too little social activity for the home buyer’s lifestyle; if there are barking dogs in
the house next door; and if the home is located on a street with a lot of traffic during commute times.
Fourth Quarter Home Sales Surge 13.9%
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the NATIONAL ASSOCIATION of REALTORS®.
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor.
“The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable.
“Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
Northwest: Regionally, existing-home sales in the Northeast rose 11.1 percent in the fourth quarter to a pace of 1.03 million and are 33.6 percent higher than a year ago. The median existing single-family home price in the Northeast declined 5.6 percent to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions.
“In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”
Midwest: In the Midwest, existing-home sales jumped 14.5 percent in the fourth quarter to a pace of 1.38 million and are 29.9 percent above a year ago. The median existing single-family home price in the Midwest rose 1.1 percent to $141,100 in the fourth quarter from the same period in 2008, with the region accounting for the majority of metro areas experiencing double-digit gains.
Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. “Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago,” he said.
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
West: Existing-home sales in the West jumped 16.2 percent in the fourth quarter to an annual rate of 1.38 million and are 18.2 percent above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9 percent below the fourth quarter of 2008, but with many areas showing notable gains.
“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor.
“The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable.
“Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
Northwest: Regionally, existing-home sales in the Northeast rose 11.1 percent in the fourth quarter to a pace of 1.03 million and are 33.6 percent higher than a year ago. The median existing single-family home price in the Northeast declined 5.6 percent to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions.
“In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”
Midwest: In the Midwest, existing-home sales jumped 14.5 percent in the fourth quarter to a pace of 1.38 million and are 29.9 percent above a year ago. The median existing single-family home price in the Midwest rose 1.1 percent to $141,100 in the fourth quarter from the same period in 2008, with the region accounting for the majority of metro areas experiencing double-digit gains.
Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. “Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago,” he said.
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
West: Existing-home sales in the West jumped 16.2 percent in the fourth quarter to an annual rate of 1.38 million and are 18.2 percent above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9 percent below the fourth quarter of 2008, but with many areas showing notable gains.
“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Long-Term Mortgage Rates Remain Stable and Low
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS)in which the 30-year fixed-rate mortgage (FRM) averaged 5.01 percent with an average 0.7 point for the week ending February 4, 2010, up from last week when it averaged 4.98 percent. Last year at this time, the 30-year FRM averaged 5.25 percent.
The 15-year FRM this week averaged 4.40 percent with an average 0.7 point, up slightly from last week when it averaged 4.39 percent. A year ago at this time, the 15-year FRM averaged 4.92 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, up from last week when it averaged 4.25 percent. A year ago, the 5-year ARM averaged 5.26 percent.
The 1-year Treasury-indexed ARM averaged 4.22 percent this week with an average 0.5 point, down from last week when it averaged 4.29 percent. At this time last year, the 1-year ARM averaged 4.92 percent.
“Mortgage rates remained relatively stable for a second week amid news of a strengthening housing market," said Frank Nothaft, Freddie Mac vice president and chief economist. “Residential fixed investment rose for two consecutive quarters over the last half of 2009 following a steady quarterly decline since the beginning of 2006. Pending existing home sales rebounded by 1 percent in December from a record drop in November that was due in part to the original expiration of the homebuyer tax credit, according the National Association of Realtors. More recently mortgage applications for home purchases jumped 10 percent at the end of January, according to figures from the Mortgage Bankers Association.”
“Even more encouraging news came from the Federal Reserve’s Senior Loan Officer Opinion Survey, which reported that banks have generally stopped tightening standards on most types of loans in the fourth quarter of 2009, with commercial real estate as the exception. However, banks have yet to unwind the tightening that occurred over the last two years. Moreover, substantially fewer banks expected credit quality to deteriorate over the coming year.”
The 15-year FRM this week averaged 4.40 percent with an average 0.7 point, up slightly from last week when it averaged 4.39 percent. A year ago at this time, the 15-year FRM averaged 4.92 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, up from last week when it averaged 4.25 percent. A year ago, the 5-year ARM averaged 5.26 percent.
The 1-year Treasury-indexed ARM averaged 4.22 percent this week with an average 0.5 point, down from last week when it averaged 4.29 percent. At this time last year, the 1-year ARM averaged 4.92 percent.
“Mortgage rates remained relatively stable for a second week amid news of a strengthening housing market," said Frank Nothaft, Freddie Mac vice president and chief economist. “Residential fixed investment rose for two consecutive quarters over the last half of 2009 following a steady quarterly decline since the beginning of 2006. Pending existing home sales rebounded by 1 percent in December from a record drop in November that was due in part to the original expiration of the homebuyer tax credit, according the National Association of Realtors. More recently mortgage applications for home purchases jumped 10 percent at the end of January, according to figures from the Mortgage Bankers Association.”
“Even more encouraging news came from the Federal Reserve’s Senior Loan Officer Opinion Survey, which reported that banks have generally stopped tightening standards on most types of loans in the fourth quarter of 2009, with commercial real estate as the exception. However, banks have yet to unwind the tightening that occurred over the last two years. Moreover, substantially fewer banks expected credit quality to deteriorate over the coming year.”
Real Estate Outlook: Positive Movement
It's a fairly rare event, but now and then most of the important economic directional signs go positive, and this is one of those weeks.
Let's start with pending home sales. After a big decline in November, they bounced back on purchase contracts signed in December and now point to an even stronger spring market.
Pending sales gained one percent nationally, 5.2 percent regionally in the Midwest, 2.3 percent in the Northeast, 2.2 percent in the South, but lost 3.8 percent in the West.
Lawrence Yun, chief economist for the National Association of Realtors, which conducts the pending sales survey, said the swings from month to month are "masking the underlying trend (in housing), which is a broad improvement over year-ago levels."
December's pending sales contracts were 11 percent higher than December 2008's.
Yun also predicts that that the two home purchase tax credits -- the extended $8,000 credit and the new $6,500 credit -- will have a significant impact on closed sales in the coming several months.
He forecasts that the two credits combined will stimulate 2.4 million sales in 2010, and most of that activity will be compressed into the first six months of the year.
The U.S. economy also is showing signs of unexpectedly vigorous growth. The GDP or gross domestic product -- that's the yardstick the government uses to gauge where the economy is headed -- grew at a rate of 5.7 percent in the fourth quarter of last year -- much faster than the consensus forecast by economists, which was in the four and a half percent range.
Manufacturing, obviously a key employment sector and important for real estate, also is showing signs of a faster rebound. Manufacturing orders were up four percent in January, according to the Institute for Supply Management, and hit the highest point since August of 2004.
Meanwhile, Frank Nothaft, chief economist for financing giant Freddie Mac, says he does not see a "double dip" in economic growth ahead, where the rebound loses steam mid-year after several strong quarters of growth.
In a discussion with Realty Times, Nothaft said that although mortgage rates are likely to rise to the mid or even upper five percent range, he sees a steady expansion of housing activity ahead for the rest of the year.
Mortgage rates last week stayed flat around 5 percent for 30 year fixed loans, and 4.3 percent for 15 year terms. Applications for mortgages to purchase homes took off big time, according to the Mortgage Bankers Association -- they rose nearly 18 percent for the week.
Let's start with pending home sales. After a big decline in November, they bounced back on purchase contracts signed in December and now point to an even stronger spring market.
Pending sales gained one percent nationally, 5.2 percent regionally in the Midwest, 2.3 percent in the Northeast, 2.2 percent in the South, but lost 3.8 percent in the West.
Lawrence Yun, chief economist for the National Association of Realtors, which conducts the pending sales survey, said the swings from month to month are "masking the underlying trend (in housing), which is a broad improvement over year-ago levels."
December's pending sales contracts were 11 percent higher than December 2008's.
Yun also predicts that that the two home purchase tax credits -- the extended $8,000 credit and the new $6,500 credit -- will have a significant impact on closed sales in the coming several months.
He forecasts that the two credits combined will stimulate 2.4 million sales in 2010, and most of that activity will be compressed into the first six months of the year.
The U.S. economy also is showing signs of unexpectedly vigorous growth. The GDP or gross domestic product -- that's the yardstick the government uses to gauge where the economy is headed -- grew at a rate of 5.7 percent in the fourth quarter of last year -- much faster than the consensus forecast by economists, which was in the four and a half percent range.
Manufacturing, obviously a key employment sector and important for real estate, also is showing signs of a faster rebound. Manufacturing orders were up four percent in January, according to the Institute for Supply Management, and hit the highest point since August of 2004.
Meanwhile, Frank Nothaft, chief economist for financing giant Freddie Mac, says he does not see a "double dip" in economic growth ahead, where the rebound loses steam mid-year after several strong quarters of growth.
In a discussion with Realty Times, Nothaft said that although mortgage rates are likely to rise to the mid or even upper five percent range, he sees a steady expansion of housing activity ahead for the rest of the year.
Mortgage rates last week stayed flat around 5 percent for 30 year fixed loans, and 4.3 percent for 15 year terms. Applications for mortgages to purchase homes took off big time, according to the Mortgage Bankers Association -- they rose nearly 18 percent for the week.
10 Home Features Buyers Want
Home designers and builders speaking at the recent International Builders Show in Las Vegas say that buyers are seeking cost-effective features and rejecting things that don’t have lasting value.
“It's all about family togetherness – casual living, entertaining and flexible spaces," says Carol Lavender, president of the Lavender Design Group in San Antonio. Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:
1.Large kitchens with islands.2.Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows. 3.Home offices.4.Main-floor master suite.5.Outdoor living space.6.Ceiling fans.7.Soaking tub in the master suite and/or an oversize shower with a seating area 8.Stone and brick exteriors rather than stucco or vinyl.9.Community walking paths and playgrounds.10.Two-car garages, but three-car garages are even more desirable.
“It's all about family togetherness – casual living, entertaining and flexible spaces," says Carol Lavender, president of the Lavender Design Group in San Antonio. Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:
1.Large kitchens with islands.2.Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows. 3.Home offices.4.Main-floor master suite.5.Outdoor living space.6.Ceiling fans.7.Soaking tub in the master suite and/or an oversize shower with a seating area 8.Stone and brick exteriors rather than stucco or vinyl.9.Community walking paths and playgrounds.10.Two-car garages, but three-car garages are even more desirable.
Homebuyer Tax Credit Boosts Economy
A new survey reveals that savvy consumers cashing in on the new and improved homebuyer tax credit are helping fuel economic recovery.
The vast majority of current homeowners say they would spend the expanded version of the homebuyer tax credit on repaying existing debts, home improvements, savings and investments and household expenses, according to a Coldwell Banker survey of 1,000 homeowners.
Paying off debts affords consumers more spending power, home improvements likewise put more equity money in their pockets and savings and investments generate income.
Consumer spending, of course, is the real fuel for the nation's economic engine. And much consumer spending is fueled by the housing market -- provided the housing market is energized.
Helping to energize the housing market and the economy is the idea behind the homebuyer tax credit and it's recent extension and expansion.
By October 2009, before President Obama signed the latest extension and expansion, more than 1.2 million tax returns had claimed about $8.5 billion in the refundable tax credit, for both new and resale homes - according to the Treasury Inspector General for Tax Administration (TIGTA).
The new law extends the existing credit for first-time homebuyers, worth up to $8,000, through April 30, 2010.
A new credit of up to $6,500 is available to qualifying existing homeowners who buy a new primary residence (or have one built) by April 30, 2010, if they owned their existing home for five consecutive years over the last eight years. Second homes don't qualify.
The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, from the current $75,000 and $150,000.
The maximum allowed home purchase price is $800,000.
More information is available from the Internal Revenue Service (IRS), including its question and answer page.
As a tangible asset with a host of other tax breaks and the potential for equity gain, a home is often a consumer's most valuable asset.
As the economic theory goes, when more consumers buy homes, the economy gets a boost.
Coldwell Banker's survey appears to confirm the theory.
Among those surveyed, 83 percent said if they purchased a home and qualified for the tax credit they would engage in "smart spending" on things that could ultimately increase income available for spending.
Only 6 percent said they would squander the money on luxury items such as vacation or shopping spree.
According to the survey most consumers would spend their tax credit:
• To pay off debts (34 percent). Paying off debts leaves more money to spend or save and invest for returns that again generate spending money.
• To make home improvements and potentially increase the value of their home and home equity (29 percent). Home equity, can be a way to consolidate other, more expensive debt or spend further on capital improvements that generate more returns on the money.
• To put into savings and investments (28 percent). Saving and investing for returns is a much better personal financial approach than using credit for purchases.
Coldwell Banker also found, after learning about the tax credit expansion, 20 percent of those surveyed said they were more likely to consider purchasing a home than they were six months ago.
Of course, what will happen when the tax credit expires in 2010, without another extension, is anyone's guess.
The vast majority of current homeowners say they would spend the expanded version of the homebuyer tax credit on repaying existing debts, home improvements, savings and investments and household expenses, according to a Coldwell Banker survey of 1,000 homeowners.
Paying off debts affords consumers more spending power, home improvements likewise put more equity money in their pockets and savings and investments generate income.
Consumer spending, of course, is the real fuel for the nation's economic engine. And much consumer spending is fueled by the housing market -- provided the housing market is energized.
Helping to energize the housing market and the economy is the idea behind the homebuyer tax credit and it's recent extension and expansion.
By October 2009, before President Obama signed the latest extension and expansion, more than 1.2 million tax returns had claimed about $8.5 billion in the refundable tax credit, for both new and resale homes - according to the Treasury Inspector General for Tax Administration (TIGTA).
The new law extends the existing credit for first-time homebuyers, worth up to $8,000, through April 30, 2010.
A new credit of up to $6,500 is available to qualifying existing homeowners who buy a new primary residence (or have one built) by April 30, 2010, if they owned their existing home for five consecutive years over the last eight years. Second homes don't qualify.
The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, from the current $75,000 and $150,000.
The maximum allowed home purchase price is $800,000.
More information is available from the Internal Revenue Service (IRS), including its question and answer page.
As a tangible asset with a host of other tax breaks and the potential for equity gain, a home is often a consumer's most valuable asset.
As the economic theory goes, when more consumers buy homes, the economy gets a boost.
Coldwell Banker's survey appears to confirm the theory.
Among those surveyed, 83 percent said if they purchased a home and qualified for the tax credit they would engage in "smart spending" on things that could ultimately increase income available for spending.
Only 6 percent said they would squander the money on luxury items such as vacation or shopping spree.
According to the survey most consumers would spend their tax credit:
• To pay off debts (34 percent). Paying off debts leaves more money to spend or save and invest for returns that again generate spending money.
• To make home improvements and potentially increase the value of their home and home equity (29 percent). Home equity, can be a way to consolidate other, more expensive debt or spend further on capital improvements that generate more returns on the money.
• To put into savings and investments (28 percent). Saving and investing for returns is a much better personal financial approach than using credit for purchases.
Coldwell Banker also found, after learning about the tax credit expansion, 20 percent of those surveyed said they were more likely to consider purchasing a home than they were six months ago.
Of course, what will happen when the tax credit expires in 2010, without another extension, is anyone's guess.
Fed leaves key rate unchanged
The Federal Reserve today announced it will maintain its target for the federal funds rate in the 0 percent to 0.25 percent range, and expects economic conditions to warrant exceptionally low levels of the federal funds rate for an extended period of time. “Information ... suggests that economic activity continues to strengthen and that deterioration in the labor market is abating,” the Fed said in a prepared statement. “Household spending is expanding at a moderate rate, but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability,” the Fed said. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve also said it will purchase a total of $1.25 trillion of agency mortgage-backed securities and nearly $175 billion of agency debt, and will gradually slow the pace of these purchases in order to promote a smooth transition in markets.
Ten Inexpensive Ways to Wow Buyers
Now is the time for home owners contemplating a spring sale to spruce up their properties in anticipation of what Mike Larson of Weiss Research calls a potentially vibrant home-selling season. "If you have been beating your head against a wall, this is going to feel a lot better,” he jokes.
Here are 10 cheap ways to make a property more attractive to shoppers.
1. Improve first impressions. Touch up the paint on the front door and other areas that buyers see first. 2. Clean up the landscaping. Trim the hedges and trees and plant some annuals in the flowerbeds. 3. Paint the interior. A coat of light yellow or cream with contrasting white woodwork looks fresh and clean. 4. Refurbish the floors. Buff the hardwoods. Install new carpets – or at least get them professionally cleaned. 5. Take care of the big problems. If the house needs a roof or the front stoop is crumbling, get them fixed. 6. Buy warranties. Putting appliances under warranty gives homebuyers a secure feeling. 7. Improve energy efficiency. New windows or improved insulation tell a potential buyer the seller is on top of things plus they come with tax benefits. 8. Replace light fixtures. Updated fixtures, especially at the entrance way and in the foyer, create a good first impression. 9. Buy a stove. Home owners whose kitchen isn’t top of the line can jazz it up for a few hundred dollars by buying a new stove, which gives the room a fresh feel. 10. Tidy up the bathrooms. Get rid of mildew, replace caulking and replace stained sinks.
Source: U.S. News & World Report, Luke Mullins (01/21/2010)
Here are 10 cheap ways to make a property more attractive to shoppers.
1. Improve first impressions. Touch up the paint on the front door and other areas that buyers see first. 2. Clean up the landscaping. Trim the hedges and trees and plant some annuals in the flowerbeds. 3. Paint the interior. A coat of light yellow or cream with contrasting white woodwork looks fresh and clean. 4. Refurbish the floors. Buff the hardwoods. Install new carpets – or at least get them professionally cleaned. 5. Take care of the big problems. If the house needs a roof or the front stoop is crumbling, get them fixed. 6. Buy warranties. Putting appliances under warranty gives homebuyers a secure feeling. 7. Improve energy efficiency. New windows or improved insulation tell a potential buyer the seller is on top of things plus they come with tax benefits. 8. Replace light fixtures. Updated fixtures, especially at the entrance way and in the foyer, create a good first impression. 9. Buy a stove. Home owners whose kitchen isn’t top of the line can jazz it up for a few hundred dollars by buying a new stove, which gives the room a fresh feel. 10. Tidy up the bathrooms. Get rid of mildew, replace caulking and replace stained sinks.
Source: U.S. News & World Report, Luke Mullins (01/21/2010)
30-Year Rates Down For Third Consecutive Week
McLean, VA –Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 4.99 percent with an average 0.7 point for the week ending January 21, 2010, down from last week when it averaged 5.06 percent. Last year at this time, the 30-year FRM averaged 5.12 percent.
The 15-year FRM this week averaged 4.40 percent with an average 0.6 point, down from last week when it averaged 4.45 percent. A year ago at this time, the 15-year FRM averaged 4.80 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, down from last week when it averaged 4.32 percent. A year ago, the 5-year ARM averaged 5.24 percent.
The 1-year Treasury-indexed ARM averaged 4.32 percent this week with an average 0.6 point, down from last week when it averaged 4.39 percent. At this time last year, the 1-year ARM averaged 4.92 percent.
"Fixed mortgage rates followed bond yields lower for the third consecutive week, pushing 30-year mortgages below 5 percent once more," said Frank Nothaft, Freddie Mac vice president and chief economist. "Similarly, ARM rates eased along with shorter-term rates, as the federal funds futures market indicates no increase in the Federal Reserve's target rate following its upcoming committee meeting on January 26th and 27th.
"Because of reduced sample sizes and work disruptions that occur with severe weather, housing starts tend to be more volatile during winter months. And, indeed, housing starts declined 4.0 percent in December, falling short of the market consensus of no change. Building permits , which are less vulnerable to weather interruptions, unexpectedly jumped 10.9 percent."
The 15-year FRM this week averaged 4.40 percent with an average 0.6 point, down from last week when it averaged 4.45 percent. A year ago at this time, the 15-year FRM averaged 4.80 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, down from last week when it averaged 4.32 percent. A year ago, the 5-year ARM averaged 5.24 percent.
The 1-year Treasury-indexed ARM averaged 4.32 percent this week with an average 0.6 point, down from last week when it averaged 4.39 percent. At this time last year, the 1-year ARM averaged 4.92 percent.
"Fixed mortgage rates followed bond yields lower for the third consecutive week, pushing 30-year mortgages below 5 percent once more," said Frank Nothaft, Freddie Mac vice president and chief economist. "Similarly, ARM rates eased along with shorter-term rates, as the federal funds futures market indicates no increase in the Federal Reserve's target rate following its upcoming committee meeting on January 26th and 27th.
"Because of reduced sample sizes and work disruptions that occur with severe weather, housing starts tend to be more volatile during winter months. And, indeed, housing starts declined 4.0 percent in December, falling short of the market consensus of no change. Building permits , which are less vulnerable to weather interruptions, unexpectedly jumped 10.9 percent."
Tax Credit Encourages Buyers to Shop Early
The homebuying season is starting early this year, thanks to the expanded first-time and move-up homebuyer tax credit.
Typically, the busiest time for home shopping starts in March and continues through May, but this year buyers who want to take advantage of the tax credits have to have a signed contract by April 30 and close the deal by June 30.
That is getting people off the couch.
"The tax credit will absolutely have an effect," says Pete Flint, CEO of residential real estate search engine Trulia.com. "It is going to shift demand from the later part of the year to the first part. January and February will be very strong. The next three months, there will be a surge in demand."
Source: USA Today, Stephanie Armour (01/20/2010)
Typically, the busiest time for home shopping starts in March and continues through May, but this year buyers who want to take advantage of the tax credits have to have a signed contract by April 30 and close the deal by June 30.
That is getting people off the couch.
"The tax credit will absolutely have an effect," says Pete Flint, CEO of residential real estate search engine Trulia.com. "It is going to shift demand from the later part of the year to the first part. January and February will be very strong. The next three months, there will be a surge in demand."
Source: USA Today, Stephanie Armour (01/20/2010)
Investors return to Real Estate Market!
Savvy investors are always the first to jump in a potentially profitable housing market and a new survey indicates things are heating up.
More than 12 percent of homebuyers today plan to purchase a home as an investment, compared to less than half, only 5.6 percent, just seven months ago, according to a recent Move.com Homeownership Survey.
Foreclosure buyers account for 25.3 percent of consumers interested in purchasing a home and 42 percent of potential foreclosure buyers regard their purchases as investments, while 57.6 percent plan to live in the foreclosed home themselves.
"This latest Homeownership Survey validates what many had hoped to see in the housing markets -- affordable prices and ample inventories are restoring the appeal of real estate to investors while providing opportunities for first time home buyers to enter the market," said Move, Inc.'s chief revenue officer, Errol Samuelson.
Interest rates below 5 percent for much of the year and low home prices, which may be at or near market bottom, are also bringing investors back to the fold.
The new and improved home-buyer tax credit, no longer just for first time home buyers, can also be a boost for those taking the practical approach to investing by buying their own home first.
Investor intelligence
Devil's in the details of foreclosure deal
Real estate investment basics
Buying foreclosures not for the novice
The survey of 1,004 consumers, conducted from October 16 to 18 this year, found:
• Foreclosure buyers are confident they will profit from discounted purchase prices, as well as healthy appreciation rates over the next five years.
• Most foreclosure buyers, 58.2 percent, expect to pay 20 percent or less than market price for a foreclosure, while 38.5 percent expect a 25 percent or greater discount.
• Expectations are high -- 73 percent expect their properties to appreciate ten percent or more in five years, 28 percent expect their purchases to appreciate 20 percent or more.
Given the current market of flat and falling home prices, that may sound like high hopes, but RealtyTrac.com explains that lenders want to unload overhead-heavy inventories of repossessed and foreclosed home.
That forces lenders to list their homes below market and offer properties at a discount, giving the buyer some built in equity.
• Foreclosure buyers intend to convert their foreclosures into rentals (13.2 percent), fix them up for re-sale (11.3 percent), or house a family member until the home can be sold at a profit (17.4 percent).
In some markets, especially resort and vacation rental markets, where rents are higher, conditions bode well for investors who want to enjoy positive cash flow as they wait for equity to build.
"If you find a well priced property located in a healthy rental market and are able to manage and monitor the property and maintain a positive cash flow from the onset for a unit used strictly for income purposes, rather than being held with the expectation of price appreciation, this could be a good time to become a landlord," said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.
More than 12 percent of homebuyers today plan to purchase a home as an investment, compared to less than half, only 5.6 percent, just seven months ago, according to a recent Move.com Homeownership Survey.
Foreclosure buyers account for 25.3 percent of consumers interested in purchasing a home and 42 percent of potential foreclosure buyers regard their purchases as investments, while 57.6 percent plan to live in the foreclosed home themselves.
"This latest Homeownership Survey validates what many had hoped to see in the housing markets -- affordable prices and ample inventories are restoring the appeal of real estate to investors while providing opportunities for first time home buyers to enter the market," said Move, Inc.'s chief revenue officer, Errol Samuelson.
Interest rates below 5 percent for much of the year and low home prices, which may be at or near market bottom, are also bringing investors back to the fold.
The new and improved home-buyer tax credit, no longer just for first time home buyers, can also be a boost for those taking the practical approach to investing by buying their own home first.
Investor intelligence
Devil's in the details of foreclosure deal
Real estate investment basics
Buying foreclosures not for the novice
The survey of 1,004 consumers, conducted from October 16 to 18 this year, found:
• Foreclosure buyers are confident they will profit from discounted purchase prices, as well as healthy appreciation rates over the next five years.
• Most foreclosure buyers, 58.2 percent, expect to pay 20 percent or less than market price for a foreclosure, while 38.5 percent expect a 25 percent or greater discount.
• Expectations are high -- 73 percent expect their properties to appreciate ten percent or more in five years, 28 percent expect their purchases to appreciate 20 percent or more.
Given the current market of flat and falling home prices, that may sound like high hopes, but RealtyTrac.com explains that lenders want to unload overhead-heavy inventories of repossessed and foreclosed home.
That forces lenders to list their homes below market and offer properties at a discount, giving the buyer some built in equity.
• Foreclosure buyers intend to convert their foreclosures into rentals (13.2 percent), fix them up for re-sale (11.3 percent), or house a family member until the home can be sold at a profit (17.4 percent).
In some markets, especially resort and vacation rental markets, where rents are higher, conditions bode well for investors who want to enjoy positive cash flow as they wait for equity to build.
"If you find a well priced property located in a healthy rental market and are able to manage and monitor the property and maintain a positive cash flow from the onset for a unit used strictly for income purposes, rather than being held with the expectation of price appreciation, this could be a good time to become a landlord," said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.
Arnold Schwarzenegger recomends another Tax Credit for Home buyers
More than 20,000 California homebuyers could get state tax credits of up to $10,000 this year under a new stimulus proposed Wednesday by Gov. Arnold Schwarzenegger.
The governor's plan to allocate $200 million in credits to buyers of new or existing homes is part of a job creation strategy. It goes now to state lawmakers for consideration.
"This is about helping eliminate extra housing to get construction back on tap," said Victoria Bradshaw, Schwarzenegger's secretary of labor and workforce development, in a call with reporters.
It's unclear how fast legislators might act. But last year, they handily approved $100 million in tax credits for buyers of new, unoccupied homes. The credits, claimed by 10,600 buyers from March through June, proved popular and ran out faster than expected.
Wednesday's announcement in the governor's annual State of the State address won praise from the state's struggling real estate sector.
"Wonderful," said Barbara Harsch, president of the Sacramento Association of Realtors. "Anything that will bring more buyers into the market, that allows more people to buy a home, is good for getting us out of the real estate slump. That eventually will get us out of the economic slump."
Building industry representatives said they wouldn't oppose extending tax credits to existing homes. But Allison Barnett, a lobbyist for the California Building Industry Association, said using credits for new home construction creates more jobs.
Would-be buyers hoped for quick passage.
"This has taken me from being on the fence to really wanting to take action," said Chris Harris, 32, of Roseville. "That can make a huge difference."
The tax credits – which would provide up to $3,333 off state taxes for each of the next three years – could be combined with an $8,000 federal tax credit. That credit for first-time buyers ends April 30.
Schwarzenegger administration officials said conditions of their proposal would be similar to last year's credit. That had no income limits, made all buyers eligible and required that buyers live in their homes. No dates have been set yet for eligibility. Buyers qualified last year by closing escrow after the credits became available on March 1.
The proposal has its critics. Some renters object to subsidizing homebuyers, and some economists think $200 million in a deficit-plagued state is better spent elsewhere.
"Housing isn't all that important of a driver of jobs," said Chris Thornberg, head of Los Angeles-based Beacon Economics. "Somehow, that the state should be spending its money to subsidize people to buy homes is nuts."
Thornberg said there is enough incentive with the federal tax credit and low interest rates.
But building industry officials think otherwise.
"We've been so hard-hit by this recession," said John Orr, president and chief executive of a builder trade group, the North State Building Industry Association in Roseville. "Our area needs jobs, and new home construction means very good jobs for the region."
Home builders counted 3,398 closed escrows in the eight-county Sacramento region during the first 11 months of 2009. That was just 9 percent of all area sales, according to San Diego County researcher MDA DataQuick. In 2005, new homes were 25 percent of sales.
The governor's plan to allocate $200 million in credits to buyers of new or existing homes is part of a job creation strategy. It goes now to state lawmakers for consideration.
"This is about helping eliminate extra housing to get construction back on tap," said Victoria Bradshaw, Schwarzenegger's secretary of labor and workforce development, in a call with reporters.
It's unclear how fast legislators might act. But last year, they handily approved $100 million in tax credits for buyers of new, unoccupied homes. The credits, claimed by 10,600 buyers from March through June, proved popular and ran out faster than expected.
Wednesday's announcement in the governor's annual State of the State address won praise from the state's struggling real estate sector.
"Wonderful," said Barbara Harsch, president of the Sacramento Association of Realtors. "Anything that will bring more buyers into the market, that allows more people to buy a home, is good for getting us out of the real estate slump. That eventually will get us out of the economic slump."
Building industry representatives said they wouldn't oppose extending tax credits to existing homes. But Allison Barnett, a lobbyist for the California Building Industry Association, said using credits for new home construction creates more jobs.
Would-be buyers hoped for quick passage.
"This has taken me from being on the fence to really wanting to take action," said Chris Harris, 32, of Roseville. "That can make a huge difference."
The tax credits – which would provide up to $3,333 off state taxes for each of the next three years – could be combined with an $8,000 federal tax credit. That credit for first-time buyers ends April 30.
Schwarzenegger administration officials said conditions of their proposal would be similar to last year's credit. That had no income limits, made all buyers eligible and required that buyers live in their homes. No dates have been set yet for eligibility. Buyers qualified last year by closing escrow after the credits became available on March 1.
The proposal has its critics. Some renters object to subsidizing homebuyers, and some economists think $200 million in a deficit-plagued state is better spent elsewhere.
"Housing isn't all that important of a driver of jobs," said Chris Thornberg, head of Los Angeles-based Beacon Economics. "Somehow, that the state should be spending its money to subsidize people to buy homes is nuts."
Thornberg said there is enough incentive with the federal tax credit and low interest rates.
But building industry officials think otherwise.
"We've been so hard-hit by this recession," said John Orr, president and chief executive of a builder trade group, the North State Building Industry Association in Roseville. "Our area needs jobs, and new home construction means very good jobs for the region."
Home builders counted 3,398 closed escrows in the eight-county Sacramento region during the first 11 months of 2009. That was just 9 percent of all area sales, according to San Diego County researcher MDA DataQuick. In 2005, new homes were 25 percent of sales.
Treasury Policy Change "Washington Report"
The Obama administration announced a blockbuster policy change over the holidays that didn't get a lot of press attention, but will affect the housing market for years.
The Treasury department said it is now committed to support Fannie Mae and Freddie Mac with as many billions of dollars as is necessary to get them through the next three years. There'll be no limit whatsoever anymore.
Previously the Treasury had limited its support to $200 billion apiece for the two formerly-private, now government-controlled, mortgage finance giants.
From here on, the Treasury said in its policy announcement, there will be no “uncertainty about the (government's) commitment to support the firms as they continue to play a vital role in the housing market during the current crisis.”
Though some critics howled that the Obama administration is writing a blank check, the significance of the move for real estate is potentially huge, for several reasons.
Number one: Fannie and Freddie provide funding for well over half the U.S. mortgage market -- making home sales and purchases possible for hundreds of thousands of consumers.
Number two: The fact that the two companies have an explicit, full faith and credit backstop from the U.S. Treasury means that Fannie and Freddie can borrow in the capital markets at more favorable rates. Those lower costs of capital can then be passed along - at least in part - to home loan borrowers in the form of lower interest rates.
Finally, a key reason for the policy change - which also included permission for the firms to retain larger mortgage-asset portfolios - is to help Fannie and Freddie provide deeper loan modification assistance to greater numbers of seriously troubled borrowers.
Both companies are now expected to reach out and offer loan principal forgiveness to delinquent and underwater home owners - something that the current Obama loan modification program does not permit.
Partly as a result, Obama's “Home Affordable Modification Program,” or “HAMP,” has been only minimally successful in attracting the participation of borrowers in the deepest trouble - especially those so far behind and underwater that they are walking away from their houses, sending back the keys to their lenders - and ultimately losses to Fannie and Freddie.
If the revised policy helps keep larger numbers of home owners out of foreclosure and out of walkaway mode, the impact on local real estate markets and home values could be significant over the coming couple of years.
The Treasury department said it is now committed to support Fannie Mae and Freddie Mac with as many billions of dollars as is necessary to get them through the next three years. There'll be no limit whatsoever anymore.
Previously the Treasury had limited its support to $200 billion apiece for the two formerly-private, now government-controlled, mortgage finance giants.
From here on, the Treasury said in its policy announcement, there will be no “uncertainty about the (government's) commitment to support the firms as they continue to play a vital role in the housing market during the current crisis.”
Though some critics howled that the Obama administration is writing a blank check, the significance of the move for real estate is potentially huge, for several reasons.
Number one: Fannie and Freddie provide funding for well over half the U.S. mortgage market -- making home sales and purchases possible for hundreds of thousands of consumers.
Number two: The fact that the two companies have an explicit, full faith and credit backstop from the U.S. Treasury means that Fannie and Freddie can borrow in the capital markets at more favorable rates. Those lower costs of capital can then be passed along - at least in part - to home loan borrowers in the form of lower interest rates.
Finally, a key reason for the policy change - which also included permission for the firms to retain larger mortgage-asset portfolios - is to help Fannie and Freddie provide deeper loan modification assistance to greater numbers of seriously troubled borrowers.
Both companies are now expected to reach out and offer loan principal forgiveness to delinquent and underwater home owners - something that the current Obama loan modification program does not permit.
Partly as a result, Obama's “Home Affordable Modification Program,” or “HAMP,” has been only minimally successful in attracting the participation of borrowers in the deepest trouble - especially those so far behind and underwater that they are walking away from their houses, sending back the keys to their lenders - and ultimately losses to Fannie and Freddie.
If the revised policy helps keep larger numbers of home owners out of foreclosure and out of walkaway mode, the impact on local real estate markets and home values could be significant over the coming couple of years.
Home Value Loss Now but Increased Pricing Expected in 2010
There’s bad news and good news coming out of the housing market. Forbes Magazine released study results by Local Market Monitor that showed the cities that lost the most value are concentrated in some areas of California, Florida, Nevada, and the Northeast.
These cities were impacted by local and national factors such as increased unemployment and the rising cost of housing which resulted in homebuyers gambling on the odds of whether they could afford long-term housing.
West Coast housing markets fared the worst, losing the most value—21.6 percent since their peak. Florida housing lost 31 percent, the Northeast lost an average of 8.6 percent, and the Midwest lost, on average, 5.6 percent. The top five cities to lose value in the West (most in California): in California--Merced, (-62.11 percent), Stockton (-54.29), Modesto (-52.42), Vallejo-Fairfield (-47.62), and in Nevada—Las Vegas-Paradise (-47.53) In the South, the top five cities to lose the most value are located in Florida: Port St. Lucie (-46.43), Cape Coral-Fort-Myers (-46.38), Naples-Marco Island (-43.63), Bradenton-Sarasota-Venice (-41.52), and Fort Lauderdale-Pompano Beach-Deerfield Beach (-39.93).
In the Northeast, the top five cities to lose value are: Providence-New Bedford, R.I. (-17.30), Worcester, Mass. (-16.17), Atlantic City, N.J. (-16.15), Poughkeepsie-Newburgh, N.Y. (-14.60), and Barnstable Town, Mass. (-14.48).
Moving to the Midwest, the top five cities to lose value are in Michigan: Detroit-Livonia (-30.66), Warren-Troy-Farmington Hills (-27.95), Flint (-27.47), Ann Arbor (-20.37), and Jackson (-17.30). Source: Forbes, Francesca, Levy (12/21/2009).
According to First American CoreLogic’s LoanPerformance Home Price Index, home prices are expected to fall another 4.2 percent in 45 of the largest housing markets before hitting bottom. The Press Release states that, “The declines will be driven primarily by the large levels of foreclosures in these areas. However, improvement in both levels of inventories and unemployment are projected to prevail in the spring of next year, resulting in an average year-over-year appreciation of just under one percent by October of 2010 for these metropolitan markets.
The report also stated that, “In August 2010, the index is projecting that 12-month appreciation for national home prices will be 4.6 percent and that home prices in two of the most depressed markets, California and Florida, will show gains in excess of 7 percent.” Cities that are projected to experience the strongest recovery in 2010 are primarily concentrated in the large urban areas of California: San Francisco (+5.7 percent), Los Angeles (+5 percent), San Diego (+4.7 percent) and Sacramento (+4.6 percent).
The report cautions that a large inventory of homes owned by banks but not yet on the market could affect the increased pricing progress. Mark Fleming, chief economist for First American CoreLogic stated in a December Press Release, "We are continuing to see improvements in the year-over-year home price change as prices have remained relatively stable since April. The additional government support for the housing market has stimulated demand and restricted supply in 2009.” However, Fleming, added, “How these government supports are removed in 2010 and the moderation of pending inventory and negative equity will be critical to the continued stability of the housing market.”
These cities were impacted by local and national factors such as increased unemployment and the rising cost of housing which resulted in homebuyers gambling on the odds of whether they could afford long-term housing.
West Coast housing markets fared the worst, losing the most value—21.6 percent since their peak. Florida housing lost 31 percent, the Northeast lost an average of 8.6 percent, and the Midwest lost, on average, 5.6 percent. The top five cities to lose value in the West (most in California): in California--Merced, (-62.11 percent), Stockton (-54.29), Modesto (-52.42), Vallejo-Fairfield (-47.62), and in Nevada—Las Vegas-Paradise (-47.53) In the South, the top five cities to lose the most value are located in Florida: Port St. Lucie (-46.43), Cape Coral-Fort-Myers (-46.38), Naples-Marco Island (-43.63), Bradenton-Sarasota-Venice (-41.52), and Fort Lauderdale-Pompano Beach-Deerfield Beach (-39.93).
In the Northeast, the top five cities to lose value are: Providence-New Bedford, R.I. (-17.30), Worcester, Mass. (-16.17), Atlantic City, N.J. (-16.15), Poughkeepsie-Newburgh, N.Y. (-14.60), and Barnstable Town, Mass. (-14.48).
Moving to the Midwest, the top five cities to lose value are in Michigan: Detroit-Livonia (-30.66), Warren-Troy-Farmington Hills (-27.95), Flint (-27.47), Ann Arbor (-20.37), and Jackson (-17.30). Source: Forbes, Francesca, Levy (12/21/2009).
According to First American CoreLogic’s LoanPerformance Home Price Index, home prices are expected to fall another 4.2 percent in 45 of the largest housing markets before hitting bottom. The Press Release states that, “The declines will be driven primarily by the large levels of foreclosures in these areas. However, improvement in both levels of inventories and unemployment are projected to prevail in the spring of next year, resulting in an average year-over-year appreciation of just under one percent by October of 2010 for these metropolitan markets.
The report also stated that, “In August 2010, the index is projecting that 12-month appreciation for national home prices will be 4.6 percent and that home prices in two of the most depressed markets, California and Florida, will show gains in excess of 7 percent.” Cities that are projected to experience the strongest recovery in 2010 are primarily concentrated in the large urban areas of California: San Francisco (+5.7 percent), Los Angeles (+5 percent), San Diego (+4.7 percent) and Sacramento (+4.6 percent).
The report cautions that a large inventory of homes owned by banks but not yet on the market could affect the increased pricing progress. Mark Fleming, chief economist for First American CoreLogic stated in a December Press Release, "We are continuing to see improvements in the year-over-year home price change as prices have remained relatively stable since April. The additional government support for the housing market has stimulated demand and restricted supply in 2009.” However, Fleming, added, “How these government supports are removed in 2010 and the moderation of pending inventory and negative equity will be critical to the continued stability of the housing market.”
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